Summary
You can start creating transactions in Zoho POS after you've set up the taxes, contacts, and items. For every transaction of goods and services, the applicable tax rates will be based on these three important factors:
- Business's operating location (mainland or specified zone)
- Mainland (On shore): These areas are governed by the UAE federal law and that Emirate's Department of Economic Development (DED) regulates it. Business in these areas is subject to the UAE's corporate tax regime, though the tax rate varies based on the business type and income level.
- Free Zone: VAT-free zones were established largely to encourage international trade. Firms in a free zone can be entirely owned by foreigners, with no requirement for local collaboration. Businesses in free zones will be subject to standard VAT rates.
- Designated Zone: These areas are specific free zones considered to be outside the UAE for tax purposes. VAT will not be charged on goods that are imported directly into a specified zone. Tax is levied on these commodities only when they leave the defined zones.
- Place of supply
- Contact’s tax treatment
Taking these aspects into account, we have identified various case situations based on operating location for both sales and purchase transactions, with varying appropriate tax rates.
Sales transactions in Mainland
Case: 1
Scenario: Selling goods or services to a VAT-registered customer in the UAE.
Tax Treatment: VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Standard rate - 5%, Zero Rate, or Out of Scope.
Case: 2
Scenario: Selling goods or services to a customer who is in the UAE and is not registered for VAT.
Tax Treatment: Non- VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Standard rate - 5%, Zero Rate, or Out of Scope.
Case: 3
Scenario: Selling goods or services to a customer who is registered for VAT in a designated zone in the UAE.
Tax Treatment: VAT Registered - Designated Zones
Place of Supply: UAE
Applicable Tax Rates: Standard rate - 5%, Zero Rate, or Out of Scope.
Case: 4
Scenario: Selling goods or services to a customer who is in a designated zone in the UAE and is not registered for VAT.
Tax Treatment: Non- VAT registered - Designated Zone
Place of Supply: UAE
Applicable Tax Rates: Standard rate - 5%, Zero Rate, or Out of Scope.
Sales Transactions in Designated Zone
Note
- If you are a VAT registered person in a designated zone, your supply will be different from that of a regular VAT registered person. You need to select your organization as a designated zone while setting it up.
- The supply of services within a designated zone will have the same treatment as that of the mainland.
Case: 1
Scenario: Selling goods or services to a VAT-registered customer in the UAE.
Tax Treatment: VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Goods - Out of Scope; Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Case: 2
Scenario: Selling goods or services to a customer in the UAE who is not registered for VAT.
Tax Treatment: Non VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Goods and Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Case: 3
Scenario: Selling goods or services to a VAT-registered customer in a designated zone in the UAE.
Tax Treatment: VAT Registered - Designated Zone
Place of Supply: UAE
Applicable Tax Rates: Goods - Out of Scope, Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Case: 4
Scenario: Selling goods or services to a customer who is in a designated zone in the UAE and is not registered for VAT.
Tax Treatment: Non VAT Registered - Designated Zone
Place of Supply: UAE
Applicable Tax Rates: Goods - Out of Scope; Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Purchase Transactions in Mainland
Domestic Reverse Charge: This mechanism in the VAT system transfers the responsibility of tax payment from the provider to the buyer. Instead of the supplier charging VAT on the invoice, the buyer of the goods or services must account for and pay the VAT to the tax authorities. This technique is intended to prevent tax fraud, which occurs when corporations collect taxes but do not pay them to the government. In this scenario, you are the buyer, so the charges will be included in your purchase transactions.
Case: 1
Scenario: Buying goods or services from a VAT-registered vendor in the UAE.
Tax Treatment: VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Goods or Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Domestic Reverse Charge: Standard Rate (5%) or Zero Rate.
Case: 2
Scenario: Buying goods or services from a vendor who is in the UAE and is not registered for VAT.
Tax Treatment: Non VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Goods or Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Domestic Reverse Charge: Standard Rate (5%) or Zero Rate.
Case: 3
Scenario: Buying goods or services from a VAT-registered vendor in a designated zone in the UAE.
Tax Treatment: VAT Registered - Designated Zones
Place of Supply: UAE
Applicable Tax Rates: Goods - Out of Scope, Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Case: 4
Scenario: Buying goods or services from a vendor who is in a designated zone in the UAE and is not registered for VAT
Tax Treatment: Non VAT Registered - Designated Zones
Place of Supply: UAE
Applicable Tax Rates: Goods or Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Domestic Reverse Charge: Standard Rate (5%) or Zero Rate.
Purchase Transactions in Degisnated Zone
Case: 1
Scenario: Buying goods or services from a VAT-registered vendor in the UAE.
Tax Treatment: VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Goods or Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Case: 2
Scenario: Buying goods or services from a vendor who is in the UAE and is not registered for VAT.
Tax Treatment: Non VAT Registered
Place of Supply: UAE
Applicable Tax Rates: Goods or Services - Out of Scope.
Case: 3
Scenario: Buying goods or services from a VAT-registered vendor in a designated zone in the UAE.
Tax Treatment: VAT Registered - Designated Zones
Place of Supply: UAE
Applicable Tax Rates: Goods - Out of Scope, Services - Standard Rate (5%), Zero Rate, or Out of Scope.
Case: 4
Scenario: Buying goods or services from a vendor who is in a designated zone in the UAE and is not registered for VAT
Tax Treatment: Non VAT Registered - Designated Zones
Place of Supply: UAE
Applicable Tax Rates: Goods or Services - Out of Scope.