As per Federal Decree Law No. (8) of 2017, ( Value Added Tax) is being implemented in the UAE from January 1, 2018 at a standard rate of 5% on all “products and services”. All companies in the UAE, with an annual turnover of AED 375,000 or more shall mandatorily register with Federal Tax Authority (FTA) and obtain Tax Registration Number (TRN).
There is a confusion whether the International Business Companies (IBC) popularly known as Offshore Companies in UAE, are within the purview of VAT law in the UAE.
As everyone knows, there are three offshore jurisdictions in the UAE – 1) Ajman Offshore 2) RAKICC 3) JAFZA Offshore. “Offshore companies ", as the name indicates, are legally considered to be outside the country. Offshore companies are non resident companies, with no eligibility to do any business within the country of incorporation. They are not allowed to establish their own office, but their legal Office will be the office of Registered Agent through which company is incorporated. Offshore companies cannot be registered with Chamber of Commerce and they cannot obtain Import Export Code.
Being a Non- resident company and not doing business within UAE, an Offshore company will not come under the purview of VAT in UAE. Its also pertinent to note that VAT is payable on the fee charged by Registered Agent for incorporation and annual maintenance of company.