With the implementation of VAT in the UAE from 1 January 2018, the supply of goods and services in the State will be subject to the VAT rate at 5 %. It is the responsibility of the companies listed under UAE VAT to levy VAT @ 5 %, raise it and hand it over to the government. VAT rate at 5% will be levied on most supplies in the UAE and certain specified goods or services and some form of supplies will be listed as exempt supplies and zero supplies. So essentially the tax structure can be defined as below for the purposes of levy:
|Rate Type||Rate of Tax|
|Zero Rated Supplies||0%|
As stated in the table above, a standard rate of 5 % will be charged on all taxable supplies of goods or services in the state including imports. The 5 % VAT rate will be levied on the taxable value to be calculated by the registered individual in accordance with the provisions of the Act or Regulation. The taxable value will be the sale value in most situations. The normal 5 % rate is consistent across the member states of the GCC.
How will I determine whether a supply is a taxable supply?
The word ‘ taxable supply’ applies broadly to all forms of supply of goods or services for use by a taxable individual doing business in the country, including zero-rated supply, but does not include exempt supply. Although zero-rated supplies are included as taxable suppliers, the tax levy is set at zero %.
Therefore, with the exception of zero-rated supplies and excluded goods, the VAT rate of 5 % should be applied to all other materials.
To decide if you should levy 5 % VAT on your supplies, all you need to do is:
- Find out whether any of your supplies are classified below zero-rated or excluded.
- If none of your supplies are included in the zero-rated list and are excluded, it is agreed that all of your supplies are taxable supplies and you must charge 5% VAT.
- If only a few of your suppliers are on the zero-rated list or are excluded, all other products will be taxable and you will have to charge 5% VAT.
The administrative regulations will provide information on zero-rated products, and exclude goods or services.
Common Standard Rated Supplies
- Retail Supplies
- Car Rentals
- Commercial Property
Common Zero – rated Supplies
- Certain Export Sales
- Telecom Service Exports
- Certain Transport
- International Transport
- Medicine/ equipment
- Investments Gold Silver /Platinum
Common Exempt Supplies
- Financial Services
- Local Passenger Transport
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