The United Arab Emirates is one of those countries of the world which have achieved the status of a progressive state in a short time. However, it has not ended its quest towards progress after achieving this status. The economic stability and progress play an important role in overall development, due to which the authorities in the UAE have introduced a unique taxation system.
The value-added tax allows the taxpayers not to follow the same criteria and amount of tax for all their goods and services. However, it lets them pay the taxes according to the value of their product and service. In other words, they just have to pay the tax relevant to the value of any good. Therefore, the VAT applies to different industries in a different manner, to help them earn little profit while fulfilling their responsibility of paying tax.
This article will provide you a brief guideline about how VAT applies to prominent industries in the United Arab Emirates.
Top 4 Industries and Their VAT Applicability in UAE
The UAE is one of the most developed countries in the Middle Eastern region. It has close trade and economic connections with the neighboring countries, which impact its fast-paced progress. On the other hand, this progress also dictates the variation in the payment of value-added tax, as it differs based on industry and local and international supply.
The following are some of the top industries in the United Arab Emirates and the description of VAT applicability over them in various scenarios.
1. Oil and Gas
The oil and gas are one of the leading industries in the United Arab Emirates, which can also be termed as the only reason for its developed status. The country produces crude oil and natural gas and exports them as well. VAT is applicable to crude oil and natural gas at the rate of zero percent.
On the other hand, the VAT rate for other products in the category of oil and gas is five percent. Calculation of tax value, as well as VAT compliance, often causes confusion to the taxpayers. Due to this, most of the oil and gas companies acquire the help of the best VAT consultancy agency to know and fulfill their responsibility on time and save their resources.
Due to the increased trade relations and popularity of the Middle Eastern region globally, the transport industry in the UAE is enjoying a great boom. The value-added tax applies to this industry; however, the criteria are different for various categories.
The domestic passenger transportation is exempt from VAT, which also includes local flights. On the other hand, VAT applies at the rate of zero percent on categories like international passenger transportation, commercial transportation, and supply of goods and services.
3. Real Estate
Real estate is also one of the leading industries in the UAE, which is facing a special boom due to the increase in international trade. International companies are establishing their units and employing people form native countries, which impact the industry.
In UAE, the bare land and sale or rented residential buildings after the first supply are exempted from VAT. On the other hand, VAT applies at the rate of zero percent on the sale of charitable buildings, rent, or sale of residential buildings after construction or conversions. VAT applies at the rate of five percent on the sale or rent of commercial buildings, land, motels, and hotels.
4. Financial Services
Financial services constitute one of the most important industries in the UAE, which also has to pay value-added tax to authorities under various categories and conditions. Although, margin-based products like those which do not have the commission, explicit fee, or discounts are exempted from VAT.
On the other hand, products with commission, discount, rebate, or explicit fee must pay VAT at the rate of five percent. Interest in lending forms like financial leasing and credit cards, along with allotment transfer and issuance of the debt security, are also exempt from VAT. If you are too busy to track VAT rates and follow them, you can consult the professionals. You can hire the help of the best VAT consultancy in Dubai and let the experts follow all the requirements on your behalf and ensure your profitability.
Know VAT rates and ensure compliance with the procedure!
One of the greatest keys to any business’s financial progress in the UAE is following the VAT compliances. The companies and industries that do not follow it have to face penalties and restrictions. All of this does not only affect their business activity but their relations in the market.
So, if you are running any business or are related to any major or minor industry, you have to pay tax. Suppose you are too busy or confused to understand the VAT requirements. In that case, you can always consult the professionals to fulfill all the conditions on your behalf and ensure better business activity due to VAT compliance.