The Significant Effects of VAT on the Restaurants in UAE

Our experts are always there to make things easier for you. Here are some blogs that can help you in understanding the VAT registration process in UAE.

By Julia | November 10th, 2017 | VAT


The Significant Effects of VAT on the Restaurants in UAE

In the United Arab Emirates, value added (more commonly known as VAT) is going to be introduced from January 1, 2018. While the entire country eagerly awaits the commencement of VAT regulations, several business owners along with restaurant owners are slightly worried as there is going to be 5% VAT on such business activities. It is a form of consumption tax that is supposedly charged on every phase of supply of goods and services.

Since a lot of small restaurants and cafeterias in the UAE don’t maintain a proper book of accounts and records of transactions, the implementation of VAT can be a reason to worry for their owners, especially for those restaurant and cafeteria owners who are making a daily sale of AED 1,000 on an average. According to the new regulations, eventually, every restaurants and cafeteria in the UAE need to register for VAT. However, for now, the restaurants, cafeterias and the SMEs (Small and medium enterprises) with an annual turnover of AED 375,000 are the ones that are coming under the VAT regulation.

For the time being, the biggest concern of the restaurant and cafeteria owners is that whether the tax invoice is to be issued and filed for each sale or delivery of service or not. According to the latest information on VAT regulation from the authority, either a detailed invoice or a summary of the invoice can be used in the given scenario. But the format for such regulation has not been released yet. Since most of the restaurant customers are going to be the end users, B2B invoices won’t be required for these restaurants.

The customers need to pay the tax to the restaurants for the availed goods or services. The restaurants can obtain input credit on the VAT paid on the expenses that took place for the business. Here are the general Input Tax Credit that can be availed in the business of a restaurant in a regular scenario:

  • Purchase of food items
  • The materials for packing
  • Rent for the restaurant
  • Delivery vehicles
  • Fixtures and furniture
  • The kitchen equipment
  • Equipment for office
  • Stationary

Since the relevant regulations have not been released till now, the exact list of items for which the Input Credit can be availed in the UAE cannot be confirmed yet. The provision of the law also commands that the businesses should maintain proper supporting documents for a period of 5 years.

Small businesses need to wait for some time to see, if the government may bring an alternative scheme; for instance, the compounding scheme where the businesses only need to pay tax on the gross value of the sales in a specific rate without availing Input Credit. Such schemes currently exist in other countries.

Worried about the changes in business due to VAT regulations? Take advice from the best VAT consultants in the country! is a business and tax consultancy firm in the UAE that provides its clients with valuable assistance in understanding the new regulations and tax provisions in the country. Our expert professionals can help you manage your business by simplifying the VAT regulations and its provisions that are relevant to your venture.

Besides VAT consultations, we also provide several other services including company setup, accounting services, auditing services and tax consultations. We use state of the technology to provide you with the best in class service, and we work relentlessly towards improving our services so that we can help your business grow seamlessly.

Leave a Reply

Your email address will not be published. Required fields are marked *

Still Not Ready for the 2018 VAT?

Keep Your Business Updated with Us!