Value-Added Tax or VAT is a tax on the consumption or use of goods and services levied at the point of sale. VAT is a form of indirect tax and is used in more than 180 countries around the world. All OECD countries except for the US have VAT (or a variation). While it feels exactly the same as a general sales tax to end-consumers, VAT is a more sophisticated tax and overcomes many challenges that affect the general sales tax.
VAT is charged at each step of the ‘supply chain’. End consumers generally bear the VAT cost while registered businesses collect and account for the tax, in a way acting as a tax collector on behalf of the Federal Tax Authority.
Only VAT registered businesses will need to charge and account for VAT; please refer to the registration section to understand your registration obligations under the UAE VAT law.
The above illustration demonstrates how VAT works throughout the a supply chain.