Learn VAT-Speak: The 10 most common terms to know

With the introduction of VAT, there has been an influx of new terms flying around the accounting departments of companies in the UAE. But you don’t have to belong to any one department to know that VAT will be changing the landscape of business in the Emirates. 

Here’s a cheat sheet to help you keep up with some of the most common terms tied to VAT that could come up in your next business meeting. 

 

1   VAT: Value-Added Tax

This is the big one! The implementation of Value-Added Tax allows businesses to collect tax for the government by obligating companies that have a taxable income greater than AED 375,000 per year to apply the tax on goods and services as specified in the laws and regulations set forth. This term can be heard around the office as both an acronym (V-A-T) and the word itself (rhymes with Bat). 

 

2  FTA: Federal Tax Authority

These are the guys who will be addressing all matters relating to VAT and other taxes in the UAE. This Authority’s board of directors is chaired by the Minister of Finance, as established under Federal Law by Decree No. 13 of 2016. 

 

3  TRN: Tax Registration Number

If you’ve registered your company on the FTA’s website, your business now has its very own Tax Registration Number, or TRN. This is a unique number given to all registered companies and persons by the FTA for tax purposes.

 

4  Standard-Rated

Any supply or import that is Standard-Rated will be subject to a standard 5% VAT charge on its value. 

 

5  Zero-Rated

Goods or services that do not fall under the Standard-Rated category could be classified as Zero-Rated, which translates to a 0% VAT charge. The FTA has detailed which goods fall under this criteria in Title Six of the VAT Law. 

 

6  OTS: Outside the Scope

In this case, the specified goods and services do not fall under Standard or Zero Rate, leaving them Outside the Scope of this tax. 

 

7  Exempt

And the last designation of goods and services under VAT Law fall under Exemption. For this classification, there is no VAT tax due at all. Title Seven of the Decree-Law details which supplies are Exempt under the new law. 

 

8  Designated Zones

These are areas deemed by the Cabinet to be outside the UAE and Implementing States when it comes to the application of VAT regulations. With the designation of these Zones come very specific rules detailed in Title Nine of the law. 

 

9  Free Zones

Only a small selection of Free Zones has been classified as Designated Zones. It is important to note that not all Designated Zones are Free Zones and vice versa! 

 

10  RCM: Reverse Charge Mechanism

This one can be a bit complex. So, we can touch on the topic by remembering that VAT is due on goods and services purchased from abroad. However, if it is a VAT-registered person receiving the goods or services in the UAE, a Reverse Charge Mechanism would be used to apply the VAT due on the import. More information on RCMs can be provided by VAT Specialists. 

 

Did we miss any terms that you’re still unsure about? Comment below so we can answer your VAT-Speak questions today!

 

Download and share the VAT-Speak Cheat Sheet below so that you’re always VAT ready.

VatMan's VAT-Speak Cheat Sheet


“By failing to prepare, you are preparing to fail.”

– Benjamin Franklin

Written by: Azeem Zafar, founder and CEO of VatMan Gulf Limited.

VatMan Gulf is the first choice for businesses requiring VAT specialist services in UAE and the rest of the GCC. We provide the best client experience and deliver value for money. VMG’s mission is to provide a VAT focused service; thus differentiating itself from the majority of firms in the region that take a very general accounting approach. At VatMan Gulf we stay well versed on VAT law developments, providing a comprehensive service that includes, but is not limited to, imparting VAT knowledge, implementing training procedures and ensuring VAT compliance on a continual basis.



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