VAT is Value Added Tax, or abbreviated to “VAT”.
VAT is an indirect tax that applies to sales and purchases i.e. it is a transaction based tax. VAT operates at each level of the supply chain from producer, manufacturer, wholesaler and retailer; this ultimately ensures that VAT is accounted for at each stage of the supply chain until it finally rests with the end user.
VAT Rate
The standard rate of VAT in the UAE is 5%.
Specific goods and services may be subject to the 0% rate of VAT or may be VAT exempt.
VAT will be charged at 0% in respect of the following main categories of supplies in the UAE:
- Exports of goods and services outside UAE.
- International transportation, and related supplies;
- Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
- Supply of certain education services, and supply of relevant goods and services made by educational institutions;
- Supply of certain Healthcare services, and supply of certain pharmaceutical products and medical equipment.
VAT Registration Requirements
A resident person must register for VAT in the UAE if the value of their taxable supplies and imports, exceeds the mandatory registration threshold of AED 375,000 over a 12-month period or is anticipated during the next 30 days.
A single VAT registration and Tax Identification Number (VAT Number) applies to all business activities undertaken by you. No person can hold more than one number and it is your responsibility to ensure that duplicate applications are not submitted.
It is the responsibility of each ANIR.COM Marketplace seller to ensure they are VAT-compliant and you should seek professional advice if you are unsure of your obligations.
VAT Number (TRN) and Income Tax Number
The VAT registration application is a standalone process and you will be issued with a Tax Registration Number (VAT Number) that is different to the number obtained in relation to other taxes. This number must be used for the purposes of conducting your VAT related business activities only.
To charge VAT you need:
In order to charge VAT you must first be registered for VAT and obtain a VAT number.
Once you are VAT registered, you are bound by the VAT rules applicable to the country in which you are registered but it normally means that you must charge VAT (where applicable) on your sales and show this VAT on a tax invoice (please consult your tax advisor for specific advice regarding invoicing requirements).
Please note that you should check VAT reporting and invoicing requirements in each country in which you register. Although these requirements are similar there can be notable differences. Please see section below regarding VAT invoicing.
As a UAE VAT registered seller you are required to charge 5% VAT on all orders shipped to customers in the UAE, unless the sale is subject to the 0% VAT rate.
VAT Return:
VAT can be reclaimed in certain circumstances through your VAT return.
Once you are VAT registered in the UAE, if you incur UAE VAT on expenditure relating to your business activities you can recover this VAT by way of your VAT return, i.e. the VAT incurred on your purchases/costs can be offset against the VAT due on your sales. VAT incurred on costs is referred to as input VAT.
A valid VAT invoice or import documentation is generally required to support a claim for VAT.
In connection with certain expenses detailed in the UAE VAT Law, VAT cannot be recoverable.
VAT Exempt
Exempt activities refers to those that are not liable to VAT. VAT is generally irrecoverable by persons engaged in VAT exempt activities and therefore a direct cost.
B2C Consumer
For the purpose of these FAQ’s, we consider that a B2C consumer is a person who is not registered or liable to be registered for VAT.
These may include private individuals, public bodies, charities and businesses that are not registered because their turnover is below the VAT registration threshold or those activities are entirely exempt from VAT.
B2B Customer
For the purposes of these FAQ’s, a business customer is a legal or natural person VAT registered, making purchases of goods and services for the purposes of carrying on a taxable business.
For the purposes of these FAQ’s, we have taken for granted that a B2B customer is able to provide with his VAT registration number.
ANIR prices inclusive of VAT
All the prices published in the ANIR.COM webpage must include the amount of any applicable VAT.
Categories non-chargable with 5% VAT
VAT will be imposed on most domestic supplies of goods and services at a standard rate of 5% with few exemptions and zero-ratings.
VAT will be charged at 0% in respect of the following main categories of supplies in the UAE:
Exports of goods and services outside the UAE.
International transportation, and related supplies;
Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
Supply of certain education services, and supply of relevant goods and services made by educational institutions;
Supply of certain Healthcare services, and supply of certain pharmaceutical products and medical equipment.
VAT registration
If you are required to register for VAT, or would like to voluntarily register for VAT, you should complete a VAT registration form via the Federal Tax Authorities online portal.
During the application process various documents will be requested to validate the information provided (e.g. trade license, certificate of incorporation, Emirates ID, Articles of Association, etc.).
The VAT registration form will also ask you to provide details about your business, such as:
- Description of business activities
- Last 12 months turnover figures
- Projected future turnover figures
- Expected values of imports and exports
- Whether you expect to deal with UAE suppliers or customers
- Details of Customs Authority registration, if applicable
The form should be completed by a person who is an authorized signatory of the business e.g. a Director, owner, someone holding Power of Attorney to sign on behalf of the business etc.
Following approval of the application a Tax Registration Number (VAT Number) will be issued.
Business VAT registration benefits
As a VAT registered business you will be obliged to charge VAT to your customers in connection with your supplies of goods or services, but you may be entitled to deduct input VAT, so that any VAT charged by your suppliers does not become a cost in your supply chain.
VAT recovery for pre-registration purchases
As per Article (56) of the UAE VAT Law, you may recover the Input VAT born before the VAT Registration on the first VAT Return to be submitted, provided that these Goods and Services were used to make taxable supplies that entitle you to recover VAT (e.g. non-exempt business activities).
However, VAT may not be recovered if the Services were received more than five years prior to the date of VAT Registration, or where the goods were moved to another Implementing State prior to the VAT Registration in the UAE.
Update of your VAT number in ANIR system
You can enter your information relating to VAT on your seller account settings.
VAT calculation on the commission and other service fee on ANIR
The introduction of VAT will increase the total amount of the commission charged by ANIR.COM to your business at a rate of 5% from 1 January 2018 and will be added to the commission rate of the website usage.
The commission will be charged from the VAT inclusive prices displayed by the VAT Registered Marketplace sellers on ANIR.COM webpage. For the non-VAT registered Marketplace sellers, the commission will be charged from the final price displayed on ANIR.COM webpage.
Your TAX invoices for ANIR services
The electronic invoices in connection with the commission fee charged by ANIR.COM will be send to your registration email.
Issue of Tax Invoice to the customer
As a seller on ANIR.COM, it is your responsibility to comply with the VAT Law at all times. This includes issuing valid tax invoices on sales made to customers (where necessary), collecting VAT (if applicable) and payment of VAT to the UAE Federal Tax Authority (“FTA”).
If you are registered for VAT, for any goods or services supplied after 1 January 2018, you will be required to issue a valid tax invoice. The particulars to be contained a tax invoice are specified in the Article (59.1) of the VAT Executive Regulations of UAE.
In any case, as a seller on ANIR.COM, it is your responsibility to comply with the VAT Law at all times. This includes issuing valid tax invoices on sales made to customers (where necessary), collecting VAT (if applicable) and payment of VAT to the UAE Federal Tax Authority (“FTA”).
VAT for Return Orders
In case of return orders, VAT will need to be refunded to the customer by way of a Tax credit note. It is an obligation of the Marketplace Seller to provide the customers with a valid Tax credit note.
Upon the return order, you should expect a request from the customer to provide with a valid Tax Credit Note.
