VAT FAQs on implementing VAT in your business

FAQ 1: Should I be registered for VAT?

Answer: : If your taxable turnover, i.e. the value of the goods and services that you supply and any imports, but excluding any exempt supplies (e.g. certain financial services and life insurance, some property transactions and local passenger transport) exceeds AED 375,000 in a 12 month period, or if you expect your taxable turnover to exceed AED 375,000 in the next 30 days, you are required to register for VAT. If your taxable turnover, or expenses which you incur that are subject to VAT, is less than AED 375,000, but more than AED 187,500, you can register for VAT voluntarily.

You can learn more about registration under VAT in our article 'VAT registration in UAE'.

FAQ 2: Can I form a tax group?

Answer: Related businesses that share economic, financial and regulatory ties (either in law, shareholding or voting rights) may be able to register as a tax group, if they have an establishment in the UAE and are legal persons under common control. Transactions between the group members are considered as out of scope of VAT and one member of the group, called a ‘representative member’, will file a consolidated VAT return covering the activities of the group. Further, all supplies made or received by any of the tax group members will be treated as made by the representative member of the group, although all members of the group will remain jointly and severally liable for VAT debts.

You can learn more about tax groups in our article 'VAT group registration'.

FAQ 3: How do I register?

Answer: The VAT registration form and tax group registration form are available on the FTA website.

You can learn more about the registration process in our article 'VAT registration in UAE'.

FAQ 4: How does VAT work?

Answer: Once you have registered for VAT, you will have to charge VAT on all the supplies that you make, unless they are exempt or zero-rated, and account for the VAT you charged and collected from customers through tax returns filed with the FTA. You will be able to recover the VAT you pay to your suppliers (input tax) on your tax returns, provided that you have a tax invoice or other evidence of the supply or import and have paid the VAT you wish to recover.

FAQ 5: Is there any input tax that I cannot reclaim?

Answer: Yes. The VAT incurred on entertainment expenses, motor vehicles used for personal purposes and employee-related expenses cannot be reclaimed.

To learn more about the expenses on which VAT recovery is blocked, you can refer our article 'Business expenses on which input tax recovery is blocked'.

FAQ 6: When will I have to pay any tax due?

Answer: You will be required to pay any tax due by the due date for each return – i.e. by the 28th of the month following the end of each tax period (or on the next working day if the normal due date falls on a national holiday or weekend).

FAQ 7: When and how will I file tax returns and what will be shown on them?

Answer: You will normally be allocated a quarterly or monthly tax period according to your annual turnover, but the FTA may allow a shorter or longer tax period if it considers that to be appropriate. You will be required to file the tax return for each tax period by the 28th of the month following the end of it (or on the next working day if the normal due date falls on a national holiday or weekend). Tax returns will be filed electronically through the FTA portal.

In each tax return, you will need to show:

• The value of standard-rated supplies made in the tax period and the output tax charged, per Emirate
• The value of zero-rated supplies made in the tax period
• The value of exempt supplies made in the tax period
• The value of any reverse charged supplies received in the tax period
• The value of expenses incurred in the tax period where you seek to recover input tax and the amount of recoverable tax
• The total amount of tax due and recoverable input tax for the tax period
• The tax payable (or refundable) for the tax period.

FAQ 8: When will I receive any refund that I claim?

Answer: Where you are eligible for refund of tax, the FTA will inform you about the approval or rejection of your refund claim within 20 working days. In certain exceptional circumstances, the FTA may inform you that it will require more time.

The implementation of VAT requires that businesses in UAE understand various aspects of the Law, prepare for the same and implement the required activities and processes in their business for good compliance under VAT. These VAT FAQs will be useful for businesses to assess their preparedness and knowledge of VAT.