One of the biggest challenges of operating a car dealership or a car showroom in the UAE is understanding and adhering to the UAE’s complex Tax Regulations. What makes Car Dealer Tax in the UAE so difficult to understand is it differs greatly to standard business tax.
EasyCars has put together the complete guide to help you understand all the different tax laws for car dealerships in the UAE.
Let’s get into it!
Introduction to UAE Tax System
The UAE has long been known as one of the most business friendly counties in the world, with some of the lowest tax rates. The main taxes that car dealerships in the UAE need to know and adhere to are, Value Added Tax, Custom Duties and Corporate Tax.
Value Added Tax (VAT)
Overview of VAT
The first and most important tax that all car dealers in the UAE need to adhere to is VAT or Value Added Tax. VAT was introduced in the UAE in January 2018. The current car dealer rate is 5%. VAT is a tax levied on all car sales. All car dealers in the UAE will need to register for VAT if your cars and imports exceed the current set threshold of AED 375,000 per annum.
VAT Registration
To register for VAT in the UAE, car dealers need to submit an application on the FTA website. The VAT application process in the UAE involves submitting detailed information about your car showroom including your trade licence and annual turnover. Once your car showroom in Dubai is registered you will receive a Tax Registration Number which must be included on all tax invoices.
VAT on Car Sales
As of 2024, all Car sales in the UAE are subject to a 5% VAT rate. This applies to both new cars for sale and used cars for sale in the UAE. When selling a car, your dealership must issue a tax invoice that clearly stipulates the VAT amount. The VAT amount is to be paid to the FTA through a VAT return.
VAT on Imports
If your car dealership in the UAE imports cars, you will also need to apply VAT on those imports. The VAT for Car Imports in the UAE is calculated based on the CIF (Cost, Insurance, and Freight) value of the imported car. Import VAT can be reclaimed as input tax in your VAT return, subject to your dealership having the correct documents like declarations and invoices.
VAT on Services
For car dealerships, VAT doesn’t just apply for car sales, VAT also applies to other services, such as repairs, maintenance, and extended warranties. All of your dealerships add on services must be invoiced with the applicable VAT rate and must be reported in your VAT returns.
VAT Returns and Payments
To trade compliantly in the UAE, all car dealerships must file VAT returns quarterly or monthly. This differs based on annual turnover. To submit your car dealerships VAT return, you can do so on the FTA portal.
Customs Duties
Overview of Customs Duties for Car Dealerships
In the UAE, Customs duties are imposed on all goods that are imported into the UAE, car sales are included in this. The standard customs duty tax rate for importing cars into the UAE is 5% of the cars CIF value. It is important to note that customs duties is payable at the time of importation.
Documentation and Compliance
To clear customs when importing a car to sell in the UAE, car dealerships must provide all key documentation like a commercial invoice, bill of landing, packing list and most importantly certificate of origin.
Exemptions and Special Considerations
If your dealership is trading in a UAE free zone you may be able to claim duty exemptions. It is important to check with your local free zone authority prior to importing a car into the UAE to see if customs duties apply.
Corporate Tax
Overview of Corporate Tax
As of June 2023, all businesses in the UAE that exceed AED 375,000 threshold are required to pay a 9% corporate tax on their net earnings. Corporate Tax is to be paid through the FTA portal at the same time of VAT payment.
Final Word,
Understanding and complying with the UAE’s tax laws can be difficult for car dealers in the UAE. The 3 key taxes presented in this piece are mandatory for all car showrooms and will need to be understood thoroughly before trading.
We hope you enjoyed reading this article. To read more articles like this, please visit the EasyCars latest news page here.
DISCLAIMER – The content within this blog does not constitute professional advice and is intended to be general in nature. Please consult with all relevant parties prior to making any decision.
The EasyCars advantage: Navigate Tax with Confidence
At this point, you might already realize the significant benefits of using a dealer management software. EasyCars is a comprehensive dealer management software solution that offers a wide range of modules to cater to the evolving requirements of operating a motor dealership in the UAE. It provides various powerful functionalities, including the ability to generate instant reports like vehicle inventory, and vehicle profit statements.
On top of this, EasyCars goes beyond simply aiding in dealership management by providing full automation for UAE VAT. EasyCars enables you to effortlessly generate tax invoices and accurately file VAT returns, ensuring that you are well-prepared for tax obligations.
EasyCars features include Simple Stock Management, Automated Advertising, Automatic VAT Calculations, Xero Accounting Integration, Facebook Automotive Inventory Ads, Dealer Websites and Business Reporting in the one central management software.
Still on the fence about EasyCars? Why not take it for a test drive? Schedule a FREE, no-obligation demo of our software today. We're confident that you'll be floored by how effortlessly EasyCars adapts to the unique contours of your dealership's needs. Ready to make tax management easy? Submit the form below to unlock your FREE no-obligation demo of the EasyCars now!