The fundamentals of VAT in the UAE

What are a VAT and a VAT return?

VAT and a VAT return

What is Value Added Tax (VAT)?

Tax is a fee that the government charges on goods and services and other transactions to finance government expenditures and public services. Tax can be direct, meaning that the taxpayer directly pays VAT to the government, or indirect when an intermediate collects VAT from the taxpayer and pays it to the government on their behalf.

VAT is levied in each phase of the supply chain process. Registered businesses act as tax collectors on behalf of the government and gather VAT from the end consumer who is the actual bearer of the cost of VAT.

What is a VAT return?

VAT return A VAT return is a periodical statement that contains all the details related to Value Added Tax required by the Federal Tax Authority. The format of this statement is available in the FTA’s e-portal and is also automatically generated by Wafeq.

FTA compatible VAT return format in Wafeq

To access the VAT return generated by Wafeq, go to Reports in the left-side menu, then click on the VAT tab.

What is the applicable VAT return period in the UAE?

Taxpayers with an annual turnover below AED 150 million are required to file their VAT returns on a quarterly basis i.e. every three calendar months. Taxpayers with an annual turnover equal to or greater than AED 150 million are required to file their VAT returns on a monthly basis. In both cases, the last date to be able to file the tax return will be the 28th day following the end of the VAT return period.

If the VAT return submission and payment due date falls on a weekend or a national holiday, you are required to file the VAT return or make the payment on the upcoming first business day.

If your business does not have transactions for the tax period, you are required to submit a “nil” VAT return by the due date.