Explain how UAE VAT works for a trading business in Dubai.
What the interviewer wants to hear
- Standard rate of 5% on most supplies
- Registration with the FTA and a TRN
- Output VAT on sales, input VAT recovery on purchases
- Zero-rated and exempt supplies
- Periodic VAT returns and records
Model answer
UAE VAT is a tax on consumption charged at a standard rate of 5% on most goods and services. A trading business registers with the Federal Tax Authority once its taxable supplies cross the registration threshold, and gets a Tax Registration Number, which must appear on its tax invoices. When it sells, it charges 5% output VAT to customers. When it buys goods and services for the business, it pays input VAT to suppliers, which it can generally recover. Each tax period, usually quarterly, it files a VAT return on EmaraTax and pays the difference between output and input VAT, or claims a refund if input is higher. Some supplies are zero-rated, such as many exports, where no VAT is charged but input VAT is still recoverable. Others are exempt, where no VAT is charged and related input VAT is not recoverable. Good records and correct invoices are essential.
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Take a timed easy round and get scored on every answer.
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