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Who Benefits From VAT and Who Doesn’t?

Each business in the UAE must record all their monetary transactions to make sure that all their financial records are appropriate and updated. Businesses that cater to the minimum annual turnover needs should register for VAT. As it is known, the UAE has strict VAT regulations that need to be followed by all businesses.

On the other hand, businesses that don’t feel they need VAT registration must maintain their monetary records at all events. This is to determine if that business needs to be registered in any case. Generally, accounting firms look after VAT-related services. For further information, you can reach out to the best VAT consultants in your town.

What Should VAT Registered Businesses Do?

Generally, VAT registered businesses must,

  • Charge on all the taxable items, goods, and services supplied by them
  • Reclaim any VAT that they have paid for any business-associated goods and services
  • Keep a track of business records that will help the government to identify that they follow the right path

In case you are a VAT-registered business, you should note and report the VAT amount that you charge and the VAT amount you pay to the government regularly. Generally, this will be a formal submission and the entire reporting process will occur online.

In case you charge more than you pay to the government, you need to pay the outstanding difference in amount to the government. However, if you have paid more than you charge, you can request a VAT refund and reclaim the amount.

Who Benefits From VAT?

Let us look into the different sectors that gain huge benefits from VAT services in the UAE.

VAT In Real Estate VAT

VAT treatment in real estate relies on the state of the property, i.e, commercial or residential. Commercial property supplies hold a standard VAT rate of 5%. However, residential property supplies are usually exempt from VAT. This states that the VAT does not include an irrecoverable cost for those who purchase their properties.

Note: To make sure that the real estate developers can recover VAT on constructing residential properties, the initial supply of residential property within 3 years of completion is rated with zero VAT.

Zero-Rated Sectors

If the main category of supplies falls under this, VAT will be charged at 0%. This includes,

  • International transportation/supplies
  • Export of items, goods, and services to outside the GCC
  • Few investment-grade valuable metals like silver and gold with 99% purity
  • Supply of particular healthcare services and associated services
  • Supply of few sea, land, and air transportation
  • Supply of certain education services along with its relevant services
  • Newly built residential properties

Who Does Not Benefit From VAT?

Following are the categories of applications that are the exempt sectors from the VAT.

  • Bare land
  • Supply of certain financial services
  • Residential properties
  • Local passenger transport

Partial Exemption

Where a VAT registered individual puts input tax on its business expenses, the tax can be obtained back if it relates to a taxable supply made by the registered individual.

However, in the case of non-taxable supply, the registered individual might not recover the paid input tax. If you are still not registered but are eligible, connect with the best accounting firms to achieve your VAT registration.

In a few situations, an expense might relate to both taxable and non-taxable supplies done by the registered individual. Under such circumstances, the registered individual will have to apportion input tax between the taxable and non-taxable supplies.

Government Entities

Typically, supplies made by government entities are subject to VAT. This is to make sure that the government sectors are not benefited unfairly in comparison to private sectors.

However, certain supplies of the government entities are excluded from the VAT scope. A few are even liable to VAT refunds. This system is implemented to prevent all budgeting issues thus offering a level playing field between sourced and outsourced activities.


While there are several businesses that benefit from the VAT, there are some that don’t get the benefits of VAT. However, if you want to gain good knowledge regarding VAT registration for your business, connect with none other than SA Consultants UAE. They are an ideal platform that deals with accounting and VAT related services.

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