Understanding VAT Advisory in Dubai: Key Insights to Know

Over the last few years, VAT (Value Added Tax) has emerged as a significant element of the financial landscape in Dubai, with businesses across all sizes having to maintain compliance with the rules and regulations defined by the UAE government. For companies based in Dubai, VAT advisory is a key service that maintains tax compliance, effective tax planning, and reduces the risk of incurring expensive penalties. This article delves into the importance of VAT advisory in Dubai, explaining why companies require expert advice to maneuver this intricate tax system.

What is VAT and How Does It Work in Dubai?

VAT is a tax on consumption that is imposed on the value added to goods and services during each production or distribution stage. In Dubai, VAT was implemented in January 2018 at a rate of 5%. The tax applies to most goods and services, except for some exceptions and exemptions. This renders VAT advisory services crucial for companies to know their obligations, keep proper records, and stay compliant with tax regulations.

The government collects tax from companies. When a company sells its products, it charges customers VAT. Companies can also recover the VAT incurred on business-related expenses. This recovery of VAT from customers along with its recovery by companies makes it a requirement for companies to keep proper accounting records.

The Role of VAT Advisory Services

VAT advisory services play a critical role in helping businesses navigate the complexities of VAT regulations in Dubai. Here’s why these services are so crucial:

VAT Registration

Companies that generate more than a specified annual turnover level (AED 375,000) need to register for VAT with the Federal Tax Authority (FTA). Nevertheless, even though your company might fall under that ceiling, it could still be wise to voluntarily register for VAT. VAT consultants assist companies in identifying whether or not registration is needed and walk them through the process.