VAT Rates in UAE
There are three types of VAT Rates in UAE. The standard VAT rate in UAE is 5 percent. The other two VAT Rates in UAE are 0 percent and exempted VAT. There are currently three major VAT rate brackets. Depending on the supply carried out by the businesses, these will be VAT-able differently. Accordingly, filing and compliance issues will arise.
Lets visit how some of the major sectors are impacted :-
With the introduction of VAT in UAE from January 1st, 2018, VAT rate at 5% will be applicable on supply of goods and services in the UAE. The businesses registered under UAE VAT are responsible to collect VAT at the rate of 5%, collect it and remit it to the government.
On most of the supplies in UAE, VAT rate at 5% will be levied and certain specified goods or services and a certain type of supplies will be classified as exempt supplies and zero rate supplies.
A simple formula for standard rate is – if its not Zero or Exempt, its probably standard rate. As you can see, a significant amount of retail is going to be directly impacted by VAT, in which the consumer will be paying taxes.
Businesses then need to make decisions whether they want to keep the prices at their current rates (and thereby the cost for the consumer increases by 5% over the current price), or businesses could begin rethinking prices to maintain volumes – if they are very price sensitive.
VAT Rate in Dubai
Zero rate supplies and exempt supplies as explained above have no visible impact on the consumer. i.e. they will not be paying any tax. However, from a business point of view, a business supplying zero rate can claim the input VAT from the government by VAT Return Filing. However, if a business conducts exempt supply, they cannot claim from the government. In this case, Businesses may look at their current pricing and margins (for loans) and look to adjust the charges. For example, public transport may increase their outgoing rates as they would be paying for petrol, maintenance etc at the standard rate when they purchase it.
There’s the cost of compliance, which the businesses need to begin to estimate now. Assessment of the applicable rates and if there’s a mix supply – businesses need to determine this and also make decisions on tweaking operations, systems and most of all, the cost of doing all of this before VAT hits the market.
A complete VAT Rate list has been posted on Federal Tax Authority (FTA) website with all the sectors.
At SAB we are working with several clients to ensure that they get this foundation assessment right and make the right moves to be VAT ready and fully compliant, in time and on time. Being a Tax Agent in UAE, we provide authentic and correct information to the client which help them taking correct measures and steps in order to avoid any VAT Fines and penalties in UAE. Contact us and let’s have a chat.