This is an indirect tax and a type of general consumption tax that is collected incrementally, based on the value added, on behalf of each steps by production or distribution / sales. Also known as goods and services tax (GST) in some countries.
VAT will apply to most your transactions in goods and services. In VAT only a few items exempted from VAT in the UAE. A few items are zero rated and the rest of the items are fully rated. The selection criteria for VAT registration will be on the annual turnover of the business activity. The UAE government has tentatively decided to introduce VAT 01 January 2018. Proposed rate of the VAT is 5% in the UAE.
Input VAT is a value added tax added to the price when you purchased goods or rendered services. If the buyer is registered in the VAT System, the buyer can deduct the amount of VAT paid from his or her settlement with the tax authorities.
Output VAT is a value added tax calculated and charged on the sales of goods and services.
Exempt supply is a system on which VAT will not be charged and for which the related input VAT is not deductible.
A zero-rated supply is a taxable supply on which VAT is charged at 0%.
Standard Rate is a supply through which VAT will be charged at 5% and for which the related input VAT is deductible.