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VAT - Value Added Tax

Value Added Tax (VAT) is an indirect tax imposed on most goods and services bought and sold in a country. It is often referred to as a type of general consumption tax and is charged at each stage of the supply chain. Businesses act as tax collectors, collecting and accounting for VAT on behalf of the government.

The ultimate consumers bear the cost of VAT, while businesses pay the collected tax to the government and may receive refunds for the tax paid to suppliers.

VAT is implemented in over 150 countries, including EU members, Canada, New Zealand, Australia, Singapore, and Malaysia.


Main Points:

  • In the UAE, VAT was introduced on January 1, 2018, at a standard rate of 5%.
  • Businesses must register for VAT if their taxable supplies and imports surpass the mandatory registration threshold of AED 375,000.
  • A business has the option to register for VAT voluntarily if its supplies and imports are below the mandatory threshold but exceed the voluntary registration threshold of AED 187,500.
  • Businesses can also choose to register voluntarily if their expenses exceed the voluntary registration threshold. This option allows start-up businesses with no turnover to register for VAT.

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