Frequently Asked Questions (FAQs)

Samples of excise goods that are given away for free will also be subject to excise tax. Excise tax is not a transaction based tax so tax is due on the goods when they are released for consumption (i.e. enter free circulation) in the UAE, regardless of whether or not they are intended for sale.

Islamic finance products are consistent with the principles of sharia and therefore often operate differently from financial products that are common internationally.

To ensure that there are no inconsistencies between the VAT treatment of standard financial services and Islamic finance products, the treatment of Islamic finance products is aligned with the treatment of similar standard financial services.

VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. The legislation includes the conditions and limitations concerning the use of this relief.

The rent of residential building will generally be exempt from VAT.

The rent of commercial building will be subject to VAT at 5%

Purchase of goods and services by tourists in the UAE will be subject to VAT. However, tourists will be eligible to reclaim the VAT incurred on their purchase of goods under the Tax Refunds for Tourists Scheme subject too meeting certain conditions.

Businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate.

Further detail on this can be found in the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax.

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The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply within the first three years of completion of construction or a subsequent supply.

In Article 1, Chapter 1 of the Federal Decree Law Number 8 of 2018 or commonly known as the VAT Law, it clearly states there that a tax agent is:

 “Any person registered with the Authority in the Register, who is appointed on behalf of another Person to represent him before the Authority and assist him in the fulfillment of his Tax obligations and the exercise of his associated tax rights states that a Tax Agent.”

Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.

Internal auditors are company employees, while external auditors work for an outside audit firm. Internal audit reports are used by management, while external audit reports are used by stakeholders, such as investors, creditors, and lenders. Internal audits are conducted throughout the year, while external auditors conduct a single annual audit. Internal auditors will examine issues related to company business practices and risks, while external auditors examine the financial records and issue an opinion regarding the financial statements of the company.

The first supply of a new residential building within the first three years of it being constructed is zero-rated. All subsequent supplies are exempt, even if within the first three years.

All supplies of commercial properties are subject to VAT at 5%, and this includes all buildings or parts thereof that are not residential buildings.

The following goods are subject to excise tax in the UAE at the following rates of tax:

– Carbonated drinks – 50%

– Energy drinks – 100%

– Tobacco – 100%

Businesses are responsible for carefully documenting their business income and costs and associated VAT charges.

Registered businesses and traders charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers.

The difference between these sums is reclaimed or paid to the government.

Non-residents that make taxable supplies in the UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies.

VAT is due on the goods and services purchased from abroad.

In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.

In case the recipient in the State is a non-registered person for VAT purposes, VAT would need to be paid before the goods are released to the person.

Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.

VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.

A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.

Accounting and bookkeeping are NOT same. There is a slight difference between each other.

Accounting is the recording of a company’s financial transactions. Accounting is very essential in order to run a business smoothly, Accounting is the language of business. If the business is not maintaining the accounts that means the business is not working efficiently and effectively.

Bookkeeping is all about recording a company’s economic activities. The entries are summarized periodically. It is known as Bookkeeping because before the computers and calculators were invented, all the financial entries were recorded in actual books. But now, transactions are recorded in an accounting software or in more electronic way.