Tax rate by region United Arab Emirates

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UAE SaaS VAT: A Complete Overview

United Arab Emirates has implemented a Value Added Tax (VAT) system, which applies to the sale of SaaS products and services. The standard VAT rate in the UAE is 5.0%. In 2018, the UAE adopted a VAT system as part of a broader economic diversification strategy. The primary objectives of the VAT system include generating new revenue streams for the government, reducing dependence on oil and gas, and enhancing the UAE’s competitiveness in the global marketplace.

United Arab Emirates

United Arab Emirates adopted a VAT system in 2018 to diversify its economy and improve public finances.

Official government link: Federal Tax Authority

5.00%

E-products and services VAT/Sales tax rate

Reduced tax rate product categories

Certain educational services for government-owned nurseries, preschools, schools, and higher educational institutions are zero rated

Exempted product categories

Some educational services may be exempt

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

Registration must be done before the first sale

Online registration possible

Yes

Local representative needed

Yes

Registration procedure

To submit the registration application online, you need to create an account on the portal, complete a questionnaire, and attach the required documents.

List of digital and electronic services liable for tax

Provision of domain name services, web hosting, and remote maintenance of software and equipment.
Supply and updating of software.
Access to electronically provided images, text, and information, including photos, screensavers, e-books, and other electronic documents and files.
On-demand supply of music, movies, and games.
Provision of e-magazines.
Supply of advertising space on websites and associated rights.
Access to political, cultural, artistic, sporting, scientific, educational, or entertainment broadcasts, including event broadcasts.
Live streaming over the Internet.
Distance learning services.
Similar services with equivalent purposes and functions.

Penalties

A 2% penalty applies to any unpaid tax amount. Additionally, a 4% monthly penalty is charged starting one month after the original due date, and continues on the same date each month thereafter.

Registration threshold

No threshold, non-resident companies must register for VAT

Filing interval

Monthly

Filing deadline

Within 28 days after the end of the tax period

E-invoicing requirements

Not mandatory, planned to be in July 2025

Record keeping

All records must be maintained for at least 5 years. This includes annual accounts and any additional information needed to verify entries. You should keep general ledgers, purchase day books, issued and received invoices and credit notes, VAT ledgers, VAT calculations, adjustments, and records of supplies, exports, and imports. These documents must be readily available for presentation to the FTA in case of a VAT audit.

Effortless Subscription Management and Billing

Registration, Filing, Records, and e-Invoicing Readiness

Businesses selling SaaS products and services in the UAE must comply with VAT regulations, including registering for VAT, charging VAT at the applicable rate, filing VAT returns, and maintaining proper records. VAT returns are typically filed monthly, and VAT payments are due within 28 days after the end of the tax period. Businesses are required to maintain detailed records of their sales, purchases, and VAT calculations for at least five years. Although not yet mandatory, e-invoicing is planned to be implemented in July 2025, encouraging businesses to prepare for the transition.

Expert Assistance for UAE SaaS VAT Compliance

To ensure compliance with UAE VAT regulations, businesses are advised to consult with tax professionals. Tax professionals can assist businesses with understanding their VAT obligations, registering for VAT, and filing VAT returns. They can also provide guidance on record-keeping requirements and best practices for managing VAT compliance. By working with a tax professional, businesses can ensure that they are meeting their VAT obligations and avoiding potential penalties.

What are the basics of SaaS sales tax for businesses in United Arab Emirates?

Businesses selling SaaS products and services in the UAE must charge VAT at the standard rate of 5.0%. VAT registration is mandatory for businesses exceeding a specific turnover threshold. Businesses must file VAT returns monthly and make VAT payments within 28 days after the end of the tax period. Maintaining proper records, including invoices and receipts, is crucial for VAT compliance. Currently, e-invoicing is not mandatory, but it is expected to become mandatory in July 2025.
How can SaaS companies comply with sales tax regulations across different regions?

SaaS companies selling their services in different regions must comply with the VAT regulations of each region. This typically involves registering for VAT in each region where they have taxable sales, charging the applicable VAT rate, and filing VAT returns in each jurisdiction. Companies can streamline their compliance efforts by using specialized software or partnering with a tax professional who has expertise in international VAT compliance.
How does customer location affect SaaS sales tax obligations in United Arab Emirates?

The location of the customer impacts the VAT obligations of a SaaS business in the UAE. If the customer is located in the UAE, the business must charge VAT at the standard rate of 5.0%. However, if the customer is located outside the UAE, the business may be exempt from charging VAT. The specific rules governing VAT treatment of cross-border SaaS sales can be complex, and it is recommended to consult with a tax professional for guidance.

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