Who is a taxable person?

• Taxable person is any person (or business) conducting an economic activity for the purpose of generating an income
• Such person is registered or obligated to register for VAT as per the registration threshold of the member state as mentioned above
• Taxable persons can include businesses located outside of GCC territory

Economic activity means an activity conducted in a continuous and regular manner and includes commercial, industrial, agricultural or professional activities. Supply means any form of supply of goods or services in exchange of a consideration.

Input tax is tax payable by a taxable person on supply of goods and services received or an import of goods and services for the purpose of carrying out economic activities.

Taxable supplies are supplies on which tax is charged according to the VAT agreement, whether at standard rate of 5% or zero rated. A deduction of input tax can be claimed against the VAT payable on taxable supplies.

Exempted supplies – supplies on which no tax is payable and for which deduction for input tax cannon be claimed.

Reverse charge mechanism – mechanism under which the recipient of goods and services is required to pay VAT instead of the supplier, when the supplier is not a taxable person in the member state where the supply has been made. It’s used because the VAT registered purchaser has to account for VAT in respect of supplies. It’s typically used for cross-border transactions to relieve a non-resident supplier from the requirement to register and account for VAT in the country of the purchaser.

The purchaser will account for VAT on its normal VAT return and he may be able to claim that VAT back on the same return, subject to the normal VAT recovery rules. It’s applied in UAE in the situations where a VAT registered person imports goods or services into the UAE which would be subject to VAT if purchased in the UAE. Reverse charging puts local and international suppliers on equal footing.

Tax group – member states may allow two or more persons who are residents of the same member state to register for VAT as a Tax group; such group will be treated as a single taxable person for payment and compliance of VAT

Two or more persons carrying on a business are able to apply for a single “group” VAT registration where:

• Each person has a place of establishment or a fixed establishment in the UAE
• The persons are “related parties”, and
• Either one person controls the others, or two or more persons form a partnership and control the others

Our team of Tax experts will assess your specific requirements, minimize your costs and maximize your long- term efficiency and accuracy. Whether you are thinking about insourcing, outsourcing or co-sourcing, we can assess your individual needs and advise on the right approach for complying with the UAE VAT system.