UAE to implement VAT on 1 January 2018 

With the implementation of value-added tax (VAT) getting closer, businesses in the UAE are advised to “take action” in order to prepare themselves for the new system.

All you need to know 

  1. Date of implementation:
    VAT is likely to be introduced across the UAE on January 1, 2018.

  2. VAT rate:
    It is expected that the standard rate of VAT will be 5%.

  3. Will VAT apply to everything?
    Some exceptions may apply on100 types of staple food, and other essential service sectors such as healthcare and education.

  4. Registration with VAT system:
    Under phase 1: UAE Companies with revenue over AED 375,000 are obliged to register under a VAT system.

    However, Companies whose revenues range between AED 187,500 and AED 375,000 will have an option to either register under the system or not during the first phase of rolling out the system.

  5. Compliance with VAT requirements
    While VAT is charged and collected by businesses on behalf of the government and as such should not be considered as a cost, there will be an additional burden in terms of administration and compliance with the new legislation. Businesses will need to amend systems, processes and procedures and will need to ensure they comply with the new requirements, such as for example:
    • Charging VAT on supplies at the correct rate;
    • Calculating VAT deductible on purchases;
    • Calculating the overall net amount of VAT to pay/ refund.
  6. What are the VAT-related responsibilities of businesses?
    All companies are required to record their financial transactions and ensure that their accounting records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their accounting records in any event, in case the Authority may inspect their accounting records in order to establish whether they should be registered.

"To comply with VAT, businesses will need to consider the need for a mix of Accountant and Tax Advisor in order to ensure up-to-date accounting records that give a clear and accurate view of the financial performance and position of their business in accordance with the accounting standards and the local tax laws".

Value Added Tax Certificate

This is a certificate issued for government authorities, private sector companies and individuals to exempt them from Value Added Tax (VAT) in various countries around the world.

Documents required for obtaining VAT Certificate

For companies:
  • A request letter signed by the company
  • Copy of a valid trade/commercial license.

For individual:
  • A request letter signed by the applicant
  • Copy of the passport along with valid UAE residency visa.

How do we support you

We support our clients by:

  • Reviewing and validating the Client’s business model, flows and capability of the existing systems for VAT compliance i.e. organization chart,
          buy, sell and consignment based model, transactions with intercompany, free zones and GCC.
  • Designing VAT solution / configuration (taxability of products and services, tax codes, invoice layout, VAT reporting, documentation, etc.)
  • Providing recommendation on internal controls
  • Providing training to the concerned finance personnel
  • Assisting in VAT registration process
  • Obtaining of VAT certificate for Companies in the UAE from the Ministry of Finance.

"Our Accounting Services help our clients in maintaining the accounting records and generation of regular accounts and reports tailor-made to each client’s specific needs and regulatory requirements"

Current double tax treaties with UAE

Though, currently there is no taxation for most of the business activities in the UAE, the UAE has the Double Tax Treaties network that gives the opportunity to substantially minimize the taxation of the business operations. This aimed to make the UAE a more attractive territory to operate. Generally, under these treaties profits generated from shares, dividends, interest, royalties and fees are taxable only in the state where the income is earned according to mutually agreed terms and conditions. Countries, who signed the Double Tax Treaties with the UAE are:

Algeria, Armenia, Austria, Azerbaijan, Belaurs, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Cyprus, Czech, Egypt, Finland, France, Georgia, Germany, Hellenic, India, India (Amendment Protocol), Indonesia, Ireland, Italy, Kazakhstan, Korea, Lebanon, Luxembourg, Malaysia, Malta, Mauritius, Mongolia, Morocco, Mozambique, Netherlands, New Zealand, Pakistan, Philippines, Poland, Portuges, Romania, Seychelles, Singapore, Spain, Sri Lanka, Sudan, Syria, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, Uzbekistan, Venezuela, Vietnam and Yemen.

Tax Resident Certificate

A certificate issued for eligible government entities, companies and individuals to take advantage of agreements of double taxation avoidance on income signed by the UAE.

Documents required for obtaining Tax Resident Certificate

For government:

  • A request letter signed by the authorized signatory
  • A copy of the decree and act of incorporation.

For companies:

  • A copy of the trade license and partners' attachment
  • Establishment contract certified by official authorities (if it is not a Sole Company)
  • A copy of the company’s owners/partners/directors' passports
  • A copy of the company’s owners/partners/directors' IDs
  • A copy of the company’s owners/partners/directors' permits of residence
  • A certified copy of the audited financial accounts
  • A validated 6-month bank statement
  • A certified copy of the lease agreement
  • Tax forms (if any) from the country in which the certificate is to be submitted.

For individual:

  • Copy of the passport
  • Copy of valid residential ID
  • A certified copy of (residential) lease agreement
  • Source of income/salary certificate
  • A validated 6-month bank statement
  • A report from the General Directorate of Residency and Foreigners Affairs specifying the number of days the resident has stayed in the UAE
  • Tax forms (if any) from the country in which the certificate is to be submitted.

How do we support you
  • Obtaining of tax residency certificate for Companies in the UAE from the Ministry of Finance
  • Reviewing & reporting of tax implications, both within a territory and cross-border
  • Advising cross-border clients under the light of U.A.E Bilateral International Tax Treaties on Avoidance of double taxation on income.

How do we support you in the UK

Our correspondent UK office supports the clients in:

  • Completing your income tax and corporation tax returns and handling all tax correspondence
  • Handling enquiries and investigations from the tax authorities
  • Advising on business and corporation taxes
  • Advising on remuneration strategies and business structures
  • Advising on capital gains tax and inheritance tax
  • Assistance with VAT registration
  • Advise on VAT planning and administration and advising of the most appropriate scheme
  • VAT control and reconciliation
  • Help with completing VAT returns.