The FTA released a public clarification document that highlights the following important points:
Every time a taxable supply is made, the recipient must receive a tax invoice that has been issued. If a taxable supply is made, an invoice for taxes must be given in every case. When a simplified tax invoice is allowed, it is not required to display the net value, or the amount before taxes, for every line item. Each line item on a full tax invoice must have its net value and tax value displayed; the gross value, or the total amount including tax, need not be displayed for every line item. A tax invoice that is issued in a foreign currency (such as USD) needs to indicate the amount of tax that was converted to AED along with the authorized exchange rate that was applied. Tax invoices must be rounded to the nearest dollar on a line-by-line basis.
What should one know about VAT services in Dubai?
Value Added Tax (VAT) was first introduced in the Gulf region in 2016 when the six Gulf Cooperation Council (GCC) states signed a VAT treaty. It was a complicated agreement that outlined the VAT principles that each GCC state was required to abide by. Not every GCC state has complied with the treaty, and it is not a law. VAT laws have been passed by Bahrain, the UAE, Saudi Arabia, and Oman; Oman will impose VAT in April 2021. Although the treaty provided guidance for each state, each state’s laws are distinct and not always interpreted in the same way, even though they are similar. The UAE’s VAT law went into effect on January 1, 2018, and more laws are being developed. The UAE’s Federal Tax Authority (FTA) is responsible for enforcing the law and has released several clarifications.
Recognizing Your Eligibility for VAT Registration
For the purposes of VAT, freelancers fall into one of three categories:
The freelancer must register for VAT Services if their revenue exceeds AED 375,000.
For freelancers earning between AED 187,500 and AED 375,000, registration is not required.
The freelancer is not eligible to register if their revenue is less than AED 187,500.
In this instance, revenue consists of imports, exports, or zero-rated supplies, reverse charge supplies, and taxable supplies. Additionally, the freelancer must have made over AED 187,500 in revenue during the previous 12 months.
What is the Dubai VAT rate?
The UAE imposed VAT on January 1, 2018, with a base rate of 5%. Of course, later legislation may alter that rate.
Both exempt and zero-rated supplies are available. The law outlines the exemptions and zero-rated categories (the most significant examples being those related to oil, education, healthcare, and certain financial services).
Conclusion: When compared to international comparators, the UAE’s 5% VAT rate is comparatively low. Nonetheless, non-compliance carries some of the harshest penalties in the world, so it’s important to follow UAE law’s requirements. The law is very complicated and has tight deadlines for compliance. Contact the author if you would like additional guidance on UAE law. It is not reasonable to assume that advice regarding a state’s VAT laws will benefit other states.