When does VAT apply to Business Set up in Dubai?
Starting a business set up in Dubai involves a spectrum of legal, administrative, and financial considerations. Among these, understanding Value Added Tax (VAT) is crucial for ensuring compliance from day one. Implemented in the UAE on January 1, 2018, VAT is an indirect tax applied to most goods and services, and its implications for new and existing businesses in Dubai are significant, requiring careful attention to registration thresholds, compliance obligations, and operational adjustments.
Overview
- VAT in the UAE is a consumption tax introduced on January 1, 2018, at a standard rate of 5%.
- Businesses engaged in taxable supplies must register for VAT if their taxable supplies and imports exceed AED 375,000 annually.
- Voluntary VAT registration is possible for businesses exceeding AED 187,500 in taxable supplies and imports.
- Free zone businesses are generally subject to VAT, though specific ‘designated zones’ can offer certain VAT benefits for goods movement.
- VAT impacts invoicing,