Value Added Tax (VAT) is a consumption tax levied on the supply of goods and services at each stage of the supply chain. Introduced in the UAE on January 1, 2018, VAT is set at a standard rate of 5%.

Key Aspects of VAT:

• Taxable Supplies: Most goods and services are subject to VAT, with certain exemptions and zero-rated supplies, such as specific healthcare and educational services.

• Input and Output Tax: Businesses collect VAT on sales (output tax) and pay VAT on purchases (input tax). The difference between output and input tax is payable to the Federal Tax Authority (FTA) or refundable.

Importance for Businesses:

Understanding VAT is crucial for compliance, accurate pricing, and financial planning. Non-compliance can lead to penalties and legal complications.

Conclusion:

VAT is a fundamental component of the UAE's tax system. Businesses must familiarize themselves with VAT regulations to ensure compliance and efficient financial management.