How does VAT work in the UAE?

VAT (Value Added Tax)

VAT is a tax levied on all levels of product value addition across the supply chain. From the point of manufacture to the point of sale to the final customer, it is imposed at every point of sale. This is accomplished by allowing tax paid on purchases (known as “Input Tax Credit” or “input VAT”) to be offset against VAT received on sales (known as “Output VAT”). The consumer is ultimately accountable for the entire tax.

VAT services in UAE and exemption

03 Categories of VAT

1). 5% Value Added Tax

-Certain private Education related goods and services

-Stationary

-Electronic Equipment

-Healthcare services such as elective, cosmetic etc

-Certain Oil and gas products including petrol at the pump

-Sale and rent of commercial buildings

-Hotels, motels and serviced accommodation

-Jewelry

-Food and beverages

2). Zero-rated supplies (0%)

-Certain Education related goods and services

-Healthcare such as vaccinations, certain medicines and medical equipment

-Crude oil and natural gas

-International transportation of passengers and goods

-Supply of a means of transport (air, sea, and land)

-99% pure gold, silver and platinum, jewelry

3). Exempt supplies

-The provision of certain financial services as defined under VAT legislation

-Residential real estate

-Bare land

-Passenger transport in the local area

How VAT System works in Dubai, UAE

The VAT will not be collected directly by the government. As a result, it is the obligation of registered firms to charge tax to customers based on output and input tax, and to remit the money to the government.

Please Refer  VAT Calculation Process

Formula for calculating VAT is:

VAT = Output Tax – Input Tax

Where:

Output Tax – The VAT collected on the sale of goods or the provision of services to customers

Input Tax – The VAT paid on the purchase of raw materials for goods or services

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