Value Added Tax (VAT) in the UAE

Introduction VAT is a consumption tax levied on most goods and services in the UAE. It was introduced on January 1, 2018, at a standard rate of 5%. The Federal Tax Authority (FTA) oversees the implementation and administration of VAT in the UAE.

Key Features of UAE VAT

Standard Rate: The general VAT rate is 5%, applicable to most goods and services.

Zero-Rated Supplies: Certain goods and services are subject to a 0% VAT rate, including exports of goods and services outside the GCC, international transportation, and certain educational and healthcare services.

Exempt Supplies: Some supplies are exempt from VAT, such as residential properties, bare land, and local passenger transport.

VAT Registration: Businesses must register for VAT if their taxable supplies and imports exceed AED 375,000 per year. Voluntary registration is available for businesses with supplies and imports between AED 187,500 and AED 375,000.

VAT Compliance

Invoicing: Businesses must issue VAT invoices for taxable supplies.

Filing Returns: VAT returns must be filed quarterly or monthly, depending on the business’s annual turnover.

Record Keeping: Businesses are required to maintain detailed records of all transactions for at least five years.

VAT Refunds Businesses can claim refunds on VAT paid on business-related expenses. Additionally, tourists can claim VAT refunds on purchases made during their stay in the UAE.

Impact on Businesses: VAT has introduced a new layer of compliance for businesses in the UAE. Proper VAT planning and compliance are essential to avoid penalties and ensure smooth operations.

Value Added Tax (VAT) in Bahrain

VAT was introduced in Bahrain on January 1, 2019, at a standard rate of 5%. However, from January 1, 2022, the standard VAT rate was increased to 10%. The National Bureau for Revenue (NBR) is responsible for implementing and collecting VAT in Bahrain. Businesses must register for VAT if their annual taxable supplies exceed BHD 37,500. Voluntary registration is available for businesses with supplies below this threshold.

Connect with us if you would like to know more on any specific aspects of VAT in UAE or Bahrain.

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