Value Added Tax (VAT) in the UAE
VAT or Value Added Tax is a levy imposed by local government authorities worldwide. The VAT is a certain rate of the amount collected by the government for goods and services sold by individuals or companies. Normally it will be in a fixed percentage of the total bill or contract value.
It is an important form of revenue for many countries including developed countries. Some countries are having multiple forms of Taxes that contribute to their GDP.
What is the rate of VAT in the UAE?
5 Percent is the rate of Value Added Tax in the United Arab Emirates.
Are all Goods and Services come under VAT in the UAE?
No. Certain goods and services are exempted from VAT in the UAE. Medicines, tablets, and certain medical equipment are having no tax. Similarly, Salary paid or Transportation charges are exempt categories of tax under the goods and service segment.
Who Pays the VAT in a Tax Payment Process?
The end-user pays the tax in this case. Similarly, in a trading and re-trading case, the last buyer who is not selling the product or service forward will be the actual tax amount payer.
How Do the Government Get the VAT from customer?
Except for the individual end-user and non-registered retailer, every buyer is required to furnish a report on their VAT amounts – both the Taxes on Selling documents – (minus) Taxes on Buying documents. This is called a VAT Return. Once the return is submitted, the collecting entity or individual needs to pay the net amount to Government. In the UAE it is all ‘Electronic’
How is the VAT Process Works in the UAE?
If a manufacturer or farmer produces an item and sold to the whole seller, the seller will pay 5% of the total goods value to the manufacturer or farmer for the government. When the whole seller sells the items to the retailer, the retailer pays 5% of the buying price to the whole seller. Also, the end-user or consumer will pay 5% of the value of goods to the retailer.
In each case above, the collector of 5% Tax from his buyer, needs to deposit the collection with the government. They need to pay only the net amount – i.e., VAT on Selling invoice – Minus VAT on Purchase Invoice – that is 5% on the gross profit of the deal.
Also To Know More About Tolls and Taxes in the UAE Click Here
Value Added Tax (VAT) in the UAE