Value Added Tax (VAT) is an indirect tax levied on the supply of goods and services that can add between 5 - 25% to your organization’s foreign business expenses. It is levied at every stage in the business cycle, itemized on the invoice and paid to the government in each state with the cost ultimately borne by the end consumer. VAT was established to encourage cross-border trade from one county to another, and was designed to be neutral to businesses if they go through the effort of recovering their foreign VAT.
VAT in UAE
According to the Federal Tax Authority in UAE the introduction of VAT was to diversify its economy exploring revenue apart from the oil which contributed major chunk for UAE’s economy.“The introduction of VAT and Excise taxes will help the UAE diversify sources of revenue so that government departments can continue to deliver excellent public services and ensure a high quality of life for coming generations”. With focus over keeping up the development work and infrastructure in UAE along with Vision 2021- The Sustainability of Infrastructure was the key objective behind the introduction of VAT and other taxes.
VAT law in UAE
VAT in UAE was introduced on 1st January 2018 with a rate of 5%. Considered as one of the lowest charged amongst major tax nations.
Individuals: VAT of 5% will apply on majority of transactions on goods and services with some exemptions.
Business: VAT of 5% will be charged on the end customer. VAT will also be applicable when buying from suppliers, the difference in the sum is then reclaimed or paid to the government.
Our VAT services
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VAT Implementation
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VAT Registration
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VAT return filing
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Excise tax registration
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VAT training
Why Can Foreign VAT Be Recovered?
In order to encourage international trade, the European Union introduced legislation in the 1990s enabling businesses to claim back VAT paid on expenses incurred while doing business in member states. VAT is refunded from the EU under the 8th Directive, which enables EU companies to reclaim from any member state, and the 13th Directive, which allows businesses established outside the 27-member bloc to claim. A number of key non-EU territories, including the US, Japan, Canada and South Korea, also refund VAT thanks to reciprocity agreements.