While UAE VAT is often considered a simple tax, the reality is different. In our previous UAE VAT returns articles, we talked about common mistakes made by businesses and what you need to know about the types of VAT in the UAE. In this post, we will cover some of the myths.
It’s important to realize that there are countless factors and variables in play when calculating UAE VAT returns and liabilities as well as recovery, which can muddle the waters, lead to mistakes and potentially lead to costly penalties from FTA.
Getting your business off the ground can be a frustrating process. Aside from providing your clients with the services or products you offer, you also have to deal with all the other aspects of running a business, such as handling finances. There is a lot of confusion about VAT, so today, we will bust some VAT myths and tell you what they are.
Several VAT myths appear on the internet, and here are some of the most common ones that you should be aware of:
- A VAT charge is mandatory if you operate a business
Every business doesn’t need to charge VAT on its goods or services. In my experience, I often speak with people who
believe they need to charge their customers UAE VAT because they are running a business.
Businesses must register for VAT before charging it. VAT registration is mandatory for businesses whose taxable supplies and imports exceed AED 375,000. As well as this, a company may choose to register for VAT voluntarily If the value of their taxable supplies and imports (or of the taxable expenses) exceeds the threshold of AED 187,500.
You must not charge your customers UAE VAT, and you cannot claim any VAT you paid on your expenses if you are not VAT registered.
- If you don’t have a UAE VAT number, you don’t have to pay VAT
Even though that is an excellent idea, VAT is a tax everyone pays when purchasing goods or services, regardless of who is buying the goods or services. Your status as a buyer does not determine whether you will be subject to a VAT or not. The status of the seller determines this.
- Clients without UAE VAT registration aren’t subject to VAT charges
People have told me they only need to charge VAT if their clients also have VAT number, but this isn’t the case. Any goods or services that fall within the scope of the VAT scheme must be subject to VAT if your business is VAT registered.
- UAE VAT Is Simple – Anyone Can Do It!
Most businesses submit their UAE VAT returns themselves or appoint unqualified staff to operate on their behalf. While it may seem easy, it is a much more challenging process, and the penalties can be quite severe if found by authorities.
Unfortunately, many self-claimed tax consultants in the region do not possess the know-how necessary to compile the data and file the UAE VAT returns promptly and effectively. The first sign of disappointment could appear when these people disappear and ultimately fail to deliver because it is extremely risky to retain or assign such people for such a highly technical task.
- Tax refunds are available to tourists
Yes. But this is subject to certain FTA conditions:
- The tourist should have entered the UAE on a tourist visa.
- The tourist must depart the UAE within three months from the date of the received tax invoice.
- The tourist must physically present the relevant goods if requested.
- The tourist may request a cash refund within one year from the validation date of the refund request.
- Cash refunds can be up to 7,000 AED.
VAT is a complicated tax system that can be confusing and stressful to navigate. Whether you’re new to the UAE or just trying to understand how VAT works, Creative Zone Tax & Accounting can work with you to ensure that your business is compliant with all relevant rules and regulations.