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VAT in the UAE





ARCA VAT final




The Government has announced on many occasions that the VAT application will commence on 1stJanuary 2018; registration will begin 3 months prior to that date. In order for the private sector to comply with tax rules, time was given to get prepared well ahead.

A great deal of preparatory work is to be carried out before the Value-Added TAX (VAT) application date. Businesses need to review their contracts, procedures, software, products, services, and even employees’ structure to comply with the new VAT regulations.

To handle the new requisite, the current workforce would require proper training to be able to handle the extensive documentation and reporting required by the VAT system. Substantial changes need to be applied to the financial systems for all businesses in the UAE.  

It is still not clear whether the companies’ current accounting software can be customized or updated to incorporate the VAT requirements, or businesses need to invest in new systems for their bookkeeping.

A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.

Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.

Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

Nevertheless, businesses of all sizes and industries need to keep proper records of their financial transactions to prove whether they’re below or above the VAT threshold.

 Authorities shall have access to the business’ transactions at anytime to verify the records kept and the reports submitted and to decide whether these businesses should be registered or not.

Moreover, and due to the expected subsequent VAT implementation in other GCC countries, UAE businesses with GCC operations need to take steps to ensure their transactions will still be viable. The Gulf Cooperation Council (GCC) will formally announce VAT and Excise Taxes treaties in the last quarter of 2016.

Because failure to comply may draw severe penalties, it’s crucial for businesses to have strict controls, and transparent accounts and documentation of income and costs and associated VAT charges..

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ARCA can help you Get VAT Ready.

ARCA’s experienced team will assist you in understanding the implications of VAT. Whether you need to install a new system of accounting, or keep your accounts, restructure or reorganize your company, or audit your accounts according to International Auditing Standards. Call us now. We’re here to help!

For more details,


* Excise taxes are taxes levied on a specific good, such as cigarettes/tobacco, alcoholic and non-alcoholic drinks, petroleum products, cars and mobile telephones. They are levied once, at import or at production stage within the country.  Excise taxesare often included in the price of the product. There are also excise taxeson activities, such as on wagering or on highway usage by trucks.

Currently, trade taxes (custom duties) are in effect, and plans are now well developed for the introduction of VAT in 2018, and discussions are ongoing in regard to the imposition of selective taxation in the form of excise taxes.