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VAT Registration & Free Zone companies in UAE

31/10/2017

21 Comments

 
Picture vat as text
​Why should free zone company register under UAE VAT 
From what we understand, in normal course of businesses  in United Arab Emirates, till the introduction of VAT there were two popular basis of classifications of the companies in UAE.  
 1. Non free zone companies (having license issued from Economic Department or municipality of any other mainland based authority with requirement of local sponsorship) 
2. Free zone companies (having license issued from one of the various free zones in Dubai, Sharjah and other emirates without requirement of  local sponsorship)  



In our opinion UAE VAT Law does not classify companies on aforesaid categorization. 
UAE VAT Law No. 8 of 2017 speaks  about "Person" (A natural or legal person.) And "Taxable Person" (Any Person registered or obligated to register for Tax purposes under UAE VAT LAW.  Any person whose taxable supply exceeds AED 375,000 then their registration is mandatory and for person's whose taxable supply is less then AED 375,000 but is in excess of AED 187,5000 could register voluntarily.  ​

Why registration under UAE VAT is in favor of companies based in free zone ?  
​Export of goods and services has been considered at zero rates other then exempted items. Taxable supply is currently subject to either 5% standard rate or zero rate of VAT. 

Vat would be payable by the companies at 5% on goods and services imported for resale in UAE other than exempted items + 5% standard rate on purchase of goods and services from other companies in UAE
.
In case of a free zone based company, where all the sales of goods and service are exported then there would be no liability of vat being export zero rated.  Such free zone companies could claim refund/ credit in future of the entire vat paid on import of goods and services + purchase of goods and services other uae companies subject to vat refund/credit rules and regulations in UAE VAT.
​
 If part of the total sales and services are made to other uae based companies then on that much sales of goods and services vat at standard rate of 5% could be charged and paid under VAT returns.  Such free zone companies could set off the 5% VAT liability collected from uae companies and customers from the VAT paid on import or local purchase of goods and services and if balances could recover as refund/credit subject to vat refund/credit rules and regulations in UAE VAT.
 
If a company does not register then the vat paid on local purchase of goods and service would not be recoverable. To claim the vat refund/credit it’s necessary to be a VAT registered business.  Thus by registering under vat the company could recover as refund/credit of the VAT paid which otherwise would be a cost to company and hitting the profit margin/ bottom line, subject to the fact how much VAT refund/credit is lost. 
In case you need any assistance and support on VAT in UAE,  please contact us info@guptaaccountants.com . Gupta Accountants competent team as Vat Consultants in Dubai, provides supports at all the stages of the VAT in UAE .
VAT | REGISTRATION | COMPLIANCE | AUDIT | REFUND | CONSULTING 
Gupta Accountants as Vat Advisor,  as Vat Consultants in Dubai and Dubai Free Zones, Vat Consultants in Abudhabi and Abudhabi  Free Zones, Vat consultants in Sharjah and Sharjah free Zone, Vat consultants in Ajman and Ajman free Zones, Vat Consultants in Fujairah and Fujairah free zones, Vat Consultants in Ras Al Khaimah and Ras Al Khaimah free zones, Vat Consultants in Umm al Quwain and Umm Al Quwain free zones provides Vat consultancy and Vat Advisory. ​
21 Comments
Gurinderpal Singh link
15/12/2017 11:31:20 am

Hi

We registered our company in RAK Free Zone, need to get the VAT registration done , can you please help

Reply
Gupta Accountants link
15/12/2017 12:01:41 pm

Dear Mr. Gurinderpal Singh.

Yes. We would be pleased to assist your company based in RAK Free Zone getting registered under UAE VAT.

The criteria for the registration under UAE VAT is that, if the taxable supply or/and import of goods and services exceeds AED 375,000/- either in last 12 months or in next 30 days then it is mandatory for the company to register under vat.

And if the taxable supply or/and import of goods and services exceeds AED 187,500/- either in last 12 months or in next 30 days then it is not mandatory for the company to register under vat. In this case company could register under vat as voluntary basis. ( If your expenses incurred by your company which are subject to VAT exceeds AED 187,500 either in last 12 months or in next 30 days you could go ahead for voluntary registration under UAE VAT)

At whatever time you meet the aforesaid criteria you could go ahead with the registration under UAE VAT.

Please note that if company registers under VAT on whatever basis, then once allotted UAE VAT TRN (Tax Registration Number ), company must file every quarter/month (depending upon the tax period allocated by Federal Tax Authority of UAE ) VAT return and settle liability of vat collected and paid in the course of business within next 28 days from the end of the tax period.

Also please note that if your company is dealing only in zero rated supply then you could go ahead with the Exception Registration under UAE VAT. Once you apply for exception registration you would be provided with exception letter/ certificate instead of TRN number subject to condition that as soon as you start dealing in Standard rated taxable supply you would register within 30 days with FTA for the TRN number.

Please review you company position in the light of above points and if registration under VAT is needed please send us an email at info@guptaaccountant.com

Reply
Rojesh link
10/1/2018 02:05:50 pm

Hi sir, our company is in saif zone sharjah and we kept some material in jebel ali fz third party warehouse after duty paid. We have to sell it to a rak fz. Is it vat exempted since both companies are in designated zone.?

Reply
Team Gupta Accountants link
10/1/2018 06:42:03 pm

Dear Mr.. Rojesh.

Thanks for your query.

As per the the UAE VAT Regulations. The transfer of Goods between Designated Zones shall not be subject to Tax if the following subject to following conditions.

1. Where the Goods, or part thereof, are not released, and are not in any way used or altered during the transfer between the Designated Zones

2. Where the transfer is undertaken in accordance with the rules for customs suspension according to GCC Common Customs Law.

Hence Sales of goods by company based in a Designated Zone (SAIF Zone) by way of Transfer of Goods held in another Designated Zone (JAFZA) to a company based in any other Designated Zone (RAKFTZ) would not be taxable under UAE VAT subject to other terms and conditions governing the movement of goods.

Reply
Rojesh link
10/1/2018 06:58:37 pm

At the time of import we paid duty and taken out material and after only we kept inside jebel ali using local entry pass. Still it is vat exempted? Is there any proceedure to follow while moving from one designated zone to another?

Zahid link
10/1/2018 06:50:56 pm

Dear SIr,

Please advise if free zone company is registered in FTA, then he is liable for return filing on all his 0rated vat.

Reply
Team Gupta Accountants link
10/1/2018 07:18:50 pm

Dear Mr. Zahid.

It should also be noted all the tax registrants must file VAT Returns as per the tax period provided in VAT Registration Certificate, who have been provided a TRN (Tax Registration Number) under UAE Value Added Tax law and regulations made there under.

Supply of zero rated (0%) goods and services and Supply of Standard rated (5%) goods and services both are taxable supply under under UAE VAT Laws and regulations.

Reply
Team Gupta Accountants link
10/1/2018 07:08:20 pm

Dear Mr. Rojesh.

Thanks for your query.

Please send us an email at info@accountants.com for further clarification.

Thanks.

Reply
nica
18/1/2018 12:04:11 pm

Dear Sir,

Our company is in freezone area, and when we apply for vat registration it was rejected and they said that we did not meet the criteria. the question do we need to re register again?

Reply
Team Gupta Accountants, Dubai - United Arab Emirates link
29/1/2018 08:13:26 pm

Dear NICA,

Thanks for visiting our blog page.

Please email us at info@guptaaccountants.com as we may need more information on the matter before we reply.

Regards.

Reply
Fareez ahmed link
4/2/2018 10:34:11 am

Hi team,

We are in freezone company and we are doing real estate business, please let me know do we require the trn for our company.


Thank you,

Regards
Ahmed

Reply
Team Gupta Accountants link
18/3/2018 05:01:41 am

Dear Ahmed,

Thanks for visiting our blog page.

Please send us an email on info@guptaaccountants.com .

We would need more information on the matter.

Regards.

Reply
Jenny
11/2/2018 01:13:06 pm

Dear Sir,

We are JAFZA company and would like to know if we sell goods outside jafza do we need to ask the customer to pay the 5% vat or the customer will pay automatically if they do have an importers code and its link on fta?

Reply
Team Gupta Accountants link
18/3/2018 04:58:24 am

Dear Jenny,

Thanks for visiting our blog page.

Please send us an email on info@guptaaccountants.com .

We would need more information on the matter.

Regards.

Reply
venkat ramanan
14/2/2018 10:43:50 am

Dear sir Our company in Saifzone, if VAT apply for Purchase and Sales. As well as Import and Export?

Reply
Team Gupta Accountants link
18/3/2018 04:59:30 am

Dear VENKAT RAMANAN,

Thanks for visiting our blog page.

Please send us an email on info@guptaaccountants.com .

We would need more information on the matter.

Regards.

Reply
Ismail Malik
26/2/2018 01:03:36 pm

Dear Sir,
I want to know that if company is in free zones purchasing/selling from /in the local UAE market we need to pay/receive VAT to our vendors/customers? Please provide the information in brief so that we may not make any mistake.

Regards,
Ismail Malik

Reply
Team Gupta Accountants link
18/3/2018 05:00:36 am

Dear Ismail Malik,

Thanks for visiting our blog page.

Please send us an email on info@guptaaccountants.com .

We would need more information on the matter.

Regards.

Reply
JOHANNES link
20/3/2018 11:36:28 am

Hi Can i just asks if one of our client was rejected in applying vat due lower income, can we still charge them vat? Thanks

Reply
ALEX JHON link
27/10/2019 01:04:45 am

Informative blogs information, we have to thanks author.

Reply
Qdot link
19/12/2019 03:15:06 pm

nice work, keep up the good work.
good job

Reply

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    Author

    Ramesh Kumar Gupta is a young and dynamic Chartered Accountant and has 21 years of experience in assurance, accounting, audit and business management.  He is a member of the Institute of Chartered Accountants of India (ICAI).  He is the Managing Partner of Gupta Accountants an accounting and advisory firm in Dubai UAE

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​E:  info@guptaaccountants.com 

We provide our periodic compliance services, like  FTA VAT  Return, FTA VAT Refund, FTA VDS Return, FTA Registration & Deregistration, Annual ESR Return & maintenance of statuary registers of UBO in UAE to the all the entities registered with  ​Ministry of Economy, Dubai Aviation City, Dubai South,  Hamriyah Free Zone Authority (HFZA),  Media Free Zone (Abu Dhabi), Central Bank of the UAE, Jebel Ali Free Zone (JAFZA) DP World,  Ajman Free Zone Authority, Abu Dhabi Airports Free Zone, Insurance Authority, Dubai World Trade center,  Ajman Media Free Zone Autority,  MASDAR, Security and Commodities Authority,  International Humanitarian City (IHC) ,Ras Al Khaimah International Corporate Centre (RAK ICC), Abu Dhabi Global Market (ADGM), Dubai Airport Free Zone , TECOM (Dubai Development Authority),  Ras Al Khaimah Economic Zone (RAKEZ), Abu Dhabi Ports, Dubai Healthcare City Authority, Dubai Multi Commodities Centre (DMCC), Fujairah Free Zone, Fujairah Creative City,  Dubai International Financial Centre (DIFC) Dubai Silicon Oasis Umm Al Quwain Free Zone (UAQ) Sharjah publishing city, Meydan Free zone, Sharjah Airport (SAIF) Zone, Khalifa Industrial Zone Abu Dhabi (KIZAD), Sharjah media city, International free zone authority Fujairah, RAK Maritime City, Sharjah Healthcare City, The Sharjah Research, Technology and Innovation Park  in addition to the assistance in the compliance with the annual audit requirements  and books of accounts. 
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  • HOME
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    • AUDIT COMPLIANCE >
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    • VALUE ADDED TAX - UAE >
      • VAT in UAE >
        • Introduction to VAT Laws in UAE
        • Frequently Used Terms in Indirect Tax System
      • VAT Registration >
        • VAT Registration in UAE
        • Who should register under VAT
        • How to apply for VAT registration in UAE
        • Tax Registration Number (TRN)
        • How to check TRN validity in UAE
        • VAT registration Deadlines in UAE
        • VAT Group Registration
        • VAT Registration Threshold Calculation in UAE
      • VAT De-Registration >
        • How to de-register under VAT in UAE
      • Recovery of Input Tax >
        • Input Tax Recovery under VAT in UAE
        • Supplies not eligible for input tax recovery under VAT in UAE
        • Supplies not eligible for input tax recovery under VAT in UAE
        • What is Capital Asset Scheme in UAE VAT ?
        • Input VAT Adjustments under Capital Assets Scheme
      • Place of Supply >
        • Place of supply of goods under VAT in UAE
        • Place of supply in case of export of goods
        • Place of supply of specific goods
        • Place of supply of services
        • Place of supply of services in special cases
        • Place of Supply of Telecommunication and Electronic Services
        • Place of Supply of Services Related to Real Estate
        • Place of Supply of Certain Transport Services