What are the VAT rules in Dubai?

Is there Value Added Tax (VAT) in Dubai?

Dubai is one of more than 160 countries worldwide that have embraced the concept of VAT. The standard VAT rate in the UAE is 5%. This means that when you buy goods or services at any point in the supply chain, there's an extra 5% added to the price, and this 5% goes to the government as tax.

Dubai introduced VAT in 2018, marking a significant shift in the financial landscape. It forms part of the UAE's wider vision of building a more sustainable and economic future. By contributing to public funds, tax-registered businesses play a crucial role in supporting the development of essential services and infrastructure.

So, while nobody enjoys the hassle of VAT, there are significant savings to be made when compared to the UK, and it's all for the greater good!

Who has to pay VAT in Dubai?

As an influencer, you are required to register for VAT if your annual earnings meet the minimum annual turnover requirement of AED 375,000.

There is also a voluntary registration threshold set at AED 187,500. Voluntarily registering for VAT allows you to benefit from input tax, i.e. claim back the VAT you pay on taxable supplies for your business.

How does VAT work in Dubai?

Value Added Tax (VAT) is a general consumption tax added to goods and services. It's a type of indirect tax that essentially puts the business owner in the position of tax collector. In Dubai, consumers pay 5% VAT, which VAT-registered businesses collect and pay to the government.

As an influencer doing business in Dubai, it's essential to understand a few key points about VAT in the UAE:

Collecting VAT - VAT-registered businesses need to charge domestic customers (that is, customers within the UAE) an extra 5% on top of their product/service prices.

VAT refunds - The good news is you can also reclaim the VAT you paid when you purchased goods and services for your business, known as 'input tax'. For example, if you spent AED 500 on video equipment, you could potentially get AED 25 (5% of AED 500) back as a VAT refund.

Filing VAT Returns - As a registered business, you'll need to file regular VAT returns to the Federal Tax Authority (FTA). This involves summarising your sales and purchases, calculating the VAT you've collected and paid, and settling the difference.

What types of goods and services are subject to VAT in Dubai?

VAT in Dubai is applicable to a wide range of goods and services. From digital products like e-books and online courses to physical goods like electronics and clothing, almost everything is subject to VAT.

Additionally, services such as consulting, advertising, and entertainment are also included.

What are the VAT exemptions?

Some goods and services in the UAE are VAT exempt, like certain healthcare and financial services. As an influencer in Dubai, however, all of your services and products supplied to customers within the UAE are likely to be subject to domestic VAT.

And here is a crucial thing to understand - the concept of domestic VAT, i.e. VAT added to the value of goods and services within the country you are operating.

If operating outside Dubai/UAE, for example, selling training plans or apps to customers in Europe, these services/goods are exempt from domestic VAT.

However, there is a common misconception that cross-border transactions are exempt from VAT full stop - not true! Just because they're not liable for UAE VAT, you must still comply with the other country's VAT laws.

When it comes to e-commerce, countries that employ VAT usually have distance selling thresholds. These thresholds determine when a business needs to register for VAT in the customer's country instead of applying their own country's VAT.

So, when trading outside of the UAE, once your business's total sales to customers in a particular country exceed the distance selling threshold of that country, you need to register for VAT in that country and comply with its VAT rules.

Since 2021, the threshold across the EU is set at €10,000, but it varies in other countries, In the UK, for example, it's £70,000. So it's essential to get professional advice if you are unsure what those thresholds are, to avoid falling foul of VAT laws.

At Capture, we heartily recommend using Stripe when trading globally from Dubai. The Stripe Tax tool automatically calculates and applies the appropriate VAT rate based on the type of product/service, the location of the business and the customer.

How do you become a VAT-registered business in Dubai?

If your annual earnings exceed the threshold of AED 375,000, you'll need to register for VAT.

First, hit the FTA website, fill out the VAT registration form, and attach the necessary docs like your trade license visa and accounts records.

From there, just await the green light. Once you're approved, you'll get a certificate with a tax registration number. Then it's a case of tweaking your pricing and issuing tax invoices for each taxable supply.

You must keep accurate records, including the VAT you pay on taxable supplies for your business, and file regular VAT returns.

Do I need an accountant to do business in Dubai?

Not technically, but you'd need to be a total financial guru and prepared to spend a LOT of time on accounting! Given the complexity of VAT and the new Corporation Tax in Dubai, not to mention the legalities of leaving the country, it's a no-brainer to hire a professional accountant in both the UK and Dubai.

Better still, get the advice of a specialist influencer accountant, like Capture Accounting. We understand the nuances of your business and are experts when it comes to UAE tax law. We can help you to understand your tax position, set up accounting procedures and ensure you stay on the right side of the Federal Tax Authority.

Is setting up a digital business in Dubai right for me?

When considering moving your influencer business to Dubai, a cost vs. benefit analysis is crucial. That's why it's essential to talk to a specialist accountant, who can help you weigh up the associated costs, e.g. trade visas, accountancy costs, and cost of living, against the potential tax benefits.

As a rule of thumb, we advise that it's only worth making the move to Dubai when you start earning more than £200,000 a year.

Talk VAT and Dubai with Capture Accounting

We hope you've found this article helpful, but no doubt you have a million questions about your own situation. If so, fill out our form, and we'll be in touch to arrange a callback.

FAQs about VAT in Dubai

What are the VAT penalties in Dubai?

Dubai has some pretty steep penalties when it comes to adhering to VAT rules. You must make sure you register for VAT if your income exceeds the threshold, or else face an AED 10,000 fine. Late and incorrect VAT returns are also punishable by incremental amounts, starting at AED 1,000.

Always ensure you adhere to the VAT regulations of the country your customer is based in, or else you will be subject to that country's VAT penalties.

Is Dubai tax-free for Brits?

Operating in Dubai is not as tax efficient as it once was, with the introduction of VAT in 2018 and the imminent introduction of Corporation Tax.

However, there is no personal income tax in the UAE, meaning that there are significant savings to be made by moving your influencer business there (if the benefits outweigh the costs, of course).

What does 'mandatory registration threshold' mean?

The mandatory registration threshold in Dubai is AED 375,000. That means when your earnings exceed this amount within the 12-month tax period, you must register for VAT or face a hefty fine.

What does 'voluntary registration threshold' mean?

Businesses in Dubai can opt to register for tax voluntarily before they hit the mandatory threshold.

The voluntary VAT threshold is AED 187,500, so you can register as soon as your income exceeds that amount. Voluntarily registering for VAT allows you to claim back the VAT you pay on taxable supplies, so it can present valuable cost savings for some businesses.