The United Arab Emirates (UAE) follows a Value Added Tax (VAT) system, and certain supplies are exempt from VAT, while others are taxable. Let us discuss about the exempt and taxable persons in this article.
Taxable Persons:
Businesses exceeding the VAT registration threshold:
Businesses with an annual taxable supply and imports exceeding the mandatory registration threshold are required to register for VAT in the UAE. The threshold may vary, but it’s generally set at AED 375,000.
Voluntary Registration:
Businesses that do not meet the mandatory registration threshold but wish to voluntarily register for VAT can do so.
Exempt Persons:
Small Businesses: Businesses with an annual taxable supply and imports below the voluntary registration threshold can choose not to register for VAT.
Certain Financial Services: Some financial services, such as interest on loans are exempt from VAT.
Residential Real Estate: The supply of residential properties for sale or lease may be exempt from VAT.
Bare Land: The supply of bare land is generally exempt from VAT.
Local Passenger Transport: The supply of local passenger transport services is exempt from VAT.
Certain Healthcare and Education Services: Some healthcare services and educational services may be exempt from VAT.
International Transportation: International transportation services for both goods and passengers may be exempt from VAT.
Certain Investment Precious Metals: The supply of certain investment precious metals may be exempt.
Important Considerations:
Zero-Rated Supplies:
In additionally, there are zero-rated supplies exempt supplies in the UAE. While exempt supplies do not attract VAT, zero-rated supplies are subject to a 0% VAT rate. Examples include certain food items, healthcare, and also education services.
Tax Groups:
Businesses under common control can register as a tax group that allows them them to be treated as a single taxable person for VAT purposes.
Updates and Changes:
VAT regulations and exemptions can change. Businesses should stay informed about any updates or changes to ensure compliance with the latest regulations.
It is crucial for businesses in the UAE to understand the VAT regulations, identify the nature of their supplies, and determine their VAT obligations accordingly. Additionally, consulting with tax professionals or the Federal Tax Authority (FTA) of the UAE can provide specific and up-to-date guidance based on the latest regulations.
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