Zero-Rated VAT for Companies in the UAE

Zero-rated vat companies based in the UAE should review their original VAT application.

We have many clients who are based in the UAE and deal in zero-rated supplies. The question this creates is whether or not this client should be registered for VAT or not.

Firstly we have had many clients join Profits Tax Consultants where they registered for VAT last year in 2017 assuming they had to be registered or else they would have banking issues. In fact we have even had clients claim they were forced to register by their bank account managers because they had large amounts of money going through their account.

So, what is the right approach?

Well we asked the FTA and this is the reply we got;

‘If you only make zero-rated supplies, you may apply to be excepted from registering for VAT.
You must still complete a VAT registration application, but you should answer “Yes” to the question: “Are you applying for an exception from VAT registration?” (Please refer to the additional instructions provided in the Authorized Signatory section in the application).’

So what does this mean, well firstly if you have a company based in the UAE making zero-rated supplies then you still have to register with the FTA BUT that the Vat application must be done correctly.

To put is into perspective till date every one of our xero-rated clients have made their vat application incorrectly and have not made it clear that they are applying for ‘an exception’.

This causes major problems and as such some of our clients have experienced AED 20,000 penalties as a result of requesting amendments incorrectly. Amendments must be made within 20 days of ‘realising’ the error.

Going forward, please check that your initial vat application was made correctly, we expect the FTA to start asking companies to explain why they are not making AED 2m to AED 6m sales when it was clearly stated on the application.

Note: zero-rated must not be confused with exempt of vat which we will discuss in our next post.

Let Profits Tax Consultants with over 20 years of VAT experience and dealing with UK tax inspectors deal with your VAT matters email us on [email protected]