Do I have to charge VAT as a soletrader in the UAE?
As a self-employed entrepreneur, you are entitled to VAT exemption.
VAT exemption means that you don't have to charge VAT on your invoices and, in principle, you don't have to file a VAT return.
On the other hand, you will not be able to 'reclaim' VAT on your business expenses.
To qualify for VAT exemption, your turnover (receipts) must not have exceeded AED 375,000 over the previous 12 months.
I operate as a business, can I benefit from VAT exemption?
Yes, the VAT exemption regime is available to all VAT taxpayers, regardless of the legal form of your company, provided that you do not exceed the exemption threshold.
If the threshold is exceeded:
If your turnover for the last 12 months exceeds AED 375,000 or if you anticipate that the threshold will be exceeded in the next 30 days, you must register for VAT and obtain a tax registration number (TRN).
Leaving the basic VAT exemption scheme has the following effects:
You must register within 30 days of exceeding the threshold
The first transaction in which the threshold is exceeded is subject to VAT.
In principle, you can deduct VAT on your business expenses incurred from the same date.
If I do not exceed the threshold, can I voluntarily opt for VAT payment?
Yes, it is entirely possible to change your VAT taxation regime and leave the exemption regime, provided that your turnover or the amount of your expenses for the last 12 months (or if you anticipate that this amount will be exceeded in the next 30 days) is at least AED 187,500.
You must register on the tax authority's website. For more information on the VAT registration procedure, click here.
Attention! Once you voluntarily opt for VAT payment, you are bound by this option for a period of 12 months.
So, do I opt or do I not opt?
The decision to opt (or not) for VAT payment will depend on several factors:
Pros:
Invoicing VAT allows me to reclaim VAT on my business expenses.
Invoicing VAT has a neutral impact on my business relationships with other professionals who can deduct VAT.
Invoicing VAT may give clients the impression that I already exceed the exemption thresholds and reinforces my professional image.
Some clients even require their suppliers to invoice VAT.
I don't have to worry about exceeding the threshold.
Cons:
Invoicing VAT will require me to regularly file VAT returns.
Invoicing VAT may increase the cost of my services if the client cannot deduct the invoiced VAT (e.g., an individual, an association, a school, a healthcare facility, etc.).
What are the steps to take on Malt if I exceed the VAT threshold or if I opt for VAT?
You must change your legal form to the following: "Soletrader with VAT option".
You must enter 5% in the "Taxes" tab of your profile.
You can then modify your assignments:
Current assignment (invoice not issued) :
In the case of a short assignment, you can then modify the quote directly from the assignment URL and manually adjust the VAT to a rate of 5%.
For recurring assignments, please contact support@malt.com so that we can update the assignment for invoices that have not yet been issued.
Job completed (invoice issued):
You will need to contact your customer to obtain their written agreement to re-open the invoice(s). Proof of the customer's acceptance(email or screenshot) and the invoice number to be modified must be sent to support@malt.com. We will then issue a credit note for the amount already paid and draw up a new invoice including VAT.
International VAT Management:
You invoice a customer based abroad
Your customer is established in a Gulf Cooperation Council ("GCC") member state and the service is not supplied/used in the UAE:
If you are subject to VAT, the application of VAT will depend on whether or not your customer is registered for VAT.
If your customer is registered for VAT in their country, they must provide you with their VAT registration number. In this case, you will issue an invoice with 0% VAT and indicate "reverse charge" on the invoice.
If your customer is not registered for VAT, then you invoice with your country's VAT (i.e. 5% in the UAE).
Your customer is not established in a Gulf Cooperation Council ("GCC") member state and the service is not provided/used in the UAE:
In this case, you invoice with 0% VAT (unless you benefit from VAT exemption, in which case you do not indicate VAT on your invoice).
You receive an invoice from a supplier established abroad (including the costs of a Malt entity abroad)
The supplier is established in a GCC Member State:
A supplier established in another GCC Member State will ask you for your VAT number ("TRN") when issuing its invoice.
If you have such a number, the supplier will normally charge you 0% VAT with the words "reverse charge".
If you do not have a VAT number (e.g. you are exempt from VAT), the supplier will invoice you with the VAT of his country of origin.
The supplier is not established in a GCC member state:
In principle, the supplier should invoice you "tax-free", depending on the legislation of its country of origin.
If you are registered for VAT, you will have to carry out a reverse charge.
This means that you will have to apply the VAT of your country of residence to the amount of the service, via your VAT return.
In principle, this reverse-charge VAT can be deducted on your VAT return and will therefore have a neutral effect on your situation.