VAT Exception in UAE

VAT Exception in UAE is a mechanism which provides registrants with concessions or exceptions to register for VAT if their taxable supplies are exclusively zero-rated. However, the FTA is not obliged to accept such requests and acceptance is at the FTA’s discretion.

How to Apply for a VAT Exception?

To request for a VAT exception in UAE, businesses must submit an official application through the FTA’s e-Services portal, providing detailed reasons for the request along with any necessary supporting documentation. The FTA reviews each case individually to determine whether the exception is justified and in line with UAE VAT laws.

Even though you’re required to complete the VAT registration process, there is an option to request an exception. During the registration, you’ll encounter a section asking if you wish to apply for an exemption from VAT registration. If applicable, select “yes” and submit your form. The Federal Tax Authority (FTA) will review your request, and its approval depends on their assessment of your eligibility for the exception.

Documents Required to apply for VAT Exception in UAE

• Trade License
• Memorandum of Association (MOA) / Article of Association  (AOA)
• Passport copy of all the shareholders
• Emirates id copy of all the shareholders
• Samples invoices (On letterhead, signed and stamped)
• Turnover Declaration (On letterhead, signed and stamped)
• Business Flowchart (On letterhead, signed and stamped)
• Declaration Letter (On letterhead, signed and stamped)
• Contact Details (Email, Mobile Number, Office Address)
• Bank details (Optional)

How VAT Exception Registration works?

1. A business can apply for a VAT exception if they have zero rated supplies. It cannot be applied based on a taxable expenses.
2. Once FTA grants exception to a business, then the business does not have to file quarterly VAT returns.
3. Since no VAT filing is required, input VAT credit or refund is not applicable.
4. Upon doing any standard-rated supplies, the VAT exception shall be converted to TRN.
5. No need to raise tax invoices.
6. Tax Registration number ending with alphabets “XC”

VAT Exception for a Free Zone company

As the Free Zone Company has surpassed the mandatory VAT registration threshold, the application must be submitted within 30 days of exceeding that limit. Since the company exclusively provides management consultancy services to foreign clients from the UAE, these are classified as zero-rated supplies. This allows the company to choose between applying for a VAT exemption or obtaining a Tax Registration Number (TRN).

VAT Exception Services

Xact Auditing is offering best VAT exception services. We are covering all the elements of VAT. If you want to understand whether you qualify for the VAT exception or not, please contact us. 

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.

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