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VAT Filing
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VAT Services in Dubai
The UAE introduced Value Added Tax (VAT) on January 1, 2018, as part of its economic diversification strategy. With a standard VAT rate of 5%, it’s one of the lowest globally. VAT applies to most goods and services, aiming to boost public sector revenue and reduce reliance on oil income.
Businesses in Dubai must file for VAT if their annual turnover exceeds AED 375,000, while those earning between AED 187,500 and AED 375,000 have the option to voluntarily file.
Once VAT filing is completed, businesses must charge VAT on their sales, collect it from customers, and file regular VAT returns detailing taxable sales and input tax (VAT paid on purchases).
VAT compliance is a critical aspect for businesses, as the Federal Tax Authority (FTA) enforces strict rules and penalties for non-compliance. To minimize tax liabilities, businesses can reclaim VAT paid on purchases through the input tax recovery system, ensuring that only the final consumer bears the tax burden.
What is Mandatory Filing?
Mandatory filing for VAT is required for businesses whose value of taxable goods and services exceeds AED 375,000 during the previous 12 months.
Once filed, the business must charge output tax—the VAT collected from customers on sales—on its taxable supplies.
Failing to comply with mandatory filing can lead to penalties and other legal consequences.
The VAT filing threshold is AED 375,000, with a voluntary threshold of AED 187,500; non-resident companies must file without a minimum threshold. VAT grouping is allowed under certain criteria.