What you should know about VAT in Dubai

How does VAT work in Dubai?

VAT or Value Added Tax is a tax on the consumption or use of your sold goods and services. This usually gets paid by the customer on every purchase they make and is considered an indirect tax. The company needs to collect this tax and return it to the government, which means that prices will be slightly higher for the services or goods that weren't obligated to any taxes in the first place. It is obligated to defer this back to the government to avoid any fines or even criminal charges. Some of these services and goods aren't liable for this, and these are:

1. Local passenger transportation
2. Land plot sales
3. Financial services
4. Sale of residential properties by realtor
   

VAT in Dubai rates at 5%, and this gets applied to all taxable goods and services. Some of these services do get excused from this, so it could be that your company isn't liable. Some of these services are:

1. Education
2. Healthcare
3. Supply or Residential properties
4. Precious material investments
5. Exports
6. International transportation

Remember that if you offer a non-taxable service you still have to register for VAT with the government and still provide an invoice with a 0% VAT.

Background of VAT in Dubai

As of the 1st of January 2018 VAT first came to Dubai, this was due to the suggestion of the International Monetary Fund which stated that the federal state had no base income that could be controlled.

They decided that it should be applied to all online and store purchases, this became the first time that there was any VAT in the Middle East.

Aside from that, the government of the United Arab Emirates are negotiating with the United States, the European Union, China and Australia on the disappearance of custom duties minimizing the income generated by different countries in the UAE.

VAT requirements

First and foremost you will need a VAT number, you can only apply for this if you possess a tax identification number. This gets obtained together with a Certificate of Incorporation and is issued by the Trade Register in Dubai. Based on this, your company will be issued a VAT Certificate.

When you want to register VAT in the UAE there are some documents you will need to have prepared, these are:

- Business License - The company's Memorandum and Articles of Association

- Registered address of the company in the UAE

- Income statement for the last 12 months

- Import-export activities of the company

The VAT registration can also be done online through the government's portal, this whole procedure could be a prickly journey for many business owners, but with the help of our experts, this is made fairly easy for everyone to do so.

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Corporate bank accounts may be one of the thorniest processes you will go through while setting up your business in Dubai. While you won't have to worry about a thing as we will arrange everything for you, it's still handy to know how everything sets in place. This bank account is going to help you observe all of your transactions, deposits and loans if required. With challenges like:

-          Requiring a physical office

-          Should prove credibility at all times

-          Not easy to open when you come from a high-risk country

To open a bank account for an LLC of Free Zone each bank has its own timeline, all in all, it will take up to four weeks to complete this process.

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Opening your bank account in Dubai

The UAE doesn't allow the do business with a personal bank account, so aside from that, you will need to open a corporate bank account as well.

Your corporate account should be a current one, this means that this has to be a transaction account.This type of account comes with the ideal way to make daily transactions, this provides a chequebook, debit card, no limit on your withdrawals, and many other strong points.

Current accounts are the main ones that will be used for corporate accounts, this comes with one obvious reason and that is: the ability of many daily transactions.

When we open your bank account we will need a few documents, these documents contain:

1. Trade license which we already have provided for you
2. Certificate of the company's registration
3. Your and the shareholder's visas and passports
4. The company's memorandum and articles of association

What about credit cards?

Credit cards are very handy to be used for businesses, this allows you to make small or big purchases on credit, they are only to be used for business purposes only, any personal purchase is not allowed here. This card is very important and can be used as a metric that is associated with your company's prosperous health.

It's also crucial to know that this card can be used for emergencies within the company, however, we do suggest you to obtain a credit card for you to build a credit score for your business.

Other than this, choosing the right credit card for you is a valuable decision to make as an entrepreneur as many banks do have different settlements. We assist you in this decision, making sure your choice will meet up to your wants and needs. With this process, you will also have to fall in on some criteria.

-          A valid trade license

-          Your age

-          Income

Getting started on this is an exciting journey where we are at support and assist at all times, making it a trouble-free process for you. We will arrange this in a time span of 2 to 4 weeks, are you ready to jump in?

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