Let’s delve deeper into a series of posts about common mistakes companies make and how to avoid them, talking about VAT. First of all, let's focus on registration and reporting issues.
There are specific conditions under which registration is mandatory:
There is also a concept of voluntary registration, which is allowed if the total value of taxable sales and imports exceeds 187,500 AED in the previous 12 months. The application should be submitted within 30 days. The reporting period is three calendar months (as specified in the registration certificate). The reporting and payment period is until the 28th day of the month following the reporting period. The tax liability to be paid is the difference between the output and input VAT.
There are several types of activities exempt from VAT, including residential property, public transport, undeveloped land, life insurance, and certain financial services.
The VAT rate is 5% for most goods and services, except for those categories exempt from taxation or taxed at 0%, such as the export of goods and services, international cargo and passenger transportation, specific means of transport like trains, trams, vessels, and aircraft, the first sale/lease of residential buildings, airplanes or ships designed for air or sea rescue and relief, certain investment precious metals, certain medical services, and related goods and services, and specific educational services and associated goods and services.
We often hear questions from our clients: "Do I need to register if I make zero-rated supplies?" In this context, let's talk about VAT exemption.
If an exemption from registration is granted, the business will not file tax returns and will not be able to recover the paid input tax.
A business is entitled to apply for exemption from registration only if it does not make any other supplies subject to the standard rate of 5%. However, please note that the Reverse Charge Mechanism for VAT is applied at 5% on importing goods and services.
What is this mechanism? We will explain it in the next article.
There are specific conditions under which registration is mandatory:
- If the total value of taxable supplies and imports exceeds the threshold of 375,000 AED in the previous 12-month period.
- If the business expects that the total value of its taxable supplies or imports will exceed 375,000 AED within the next 30 days.
There is also a concept of voluntary registration, which is allowed if the total value of taxable sales and imports exceeds 187,500 AED in the previous 12 months. The application should be submitted within 30 days. The reporting period is three calendar months (as specified in the registration certificate). The reporting and payment period is until the 28th day of the month following the reporting period. The tax liability to be paid is the difference between the output and input VAT.
There are several types of activities exempt from VAT, including residential property, public transport, undeveloped land, life insurance, and certain financial services.
The VAT rate is 5% for most goods and services, except for those categories exempt from taxation or taxed at 0%, such as the export of goods and services, international cargo and passenger transportation, specific means of transport like trains, trams, vessels, and aircraft, the first sale/lease of residential buildings, airplanes or ships designed for air or sea rescue and relief, certain investment precious metals, certain medical services, and related goods and services, and specific educational services and associated goods and services.
We often hear questions from our clients: "Do I need to register if I make zero-rated supplies?" In this context, let's talk about VAT exemption.
If an exemption from registration is granted, the business will not file tax returns and will not be able to recover the paid input tax.
A business is entitled to apply for exemption from registration only if it does not make any other supplies subject to the standard rate of 5%. However, please note that the Reverse Charge Mechanism for VAT is applied at 5% on importing goods and services.
What is this mechanism? We will explain it in the next article.