VAT on Business Setup and PRO Services

Introduction

The UAE is a leading destination for entrepreneurs and investors, thanks to its robust infrastructure and tax-friendly policies. As a result, business setup consultancies and PRO (Public Relations Officer) service providers play a crucial role in facilitating company formation, licensing, visa processing, and government-related paperwork. However, these services are not exempt from Value Added Tax (VAT) and are subject to clear compliance requirements under UAE VAT law.

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1. Are Business Setup and PRO Services Subject to VAT?

Yes. Business setup and PRO services are classified as taxable services under UAE VAT law and are generally subject to 5% VAT, unless they qualify under specific zero-rated or out-of-scope rules (rare in this sector).

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2. Examples of Taxable Business Setup and PRO Services

• Company incorporation (Mainland, Free Zone, Offshore)

• Trade license applications or renewals

• Local sponsor arrangements

• Visa applications and cancellations

• Labour and immigration services

• Emirates ID processing

• Notary and document attestation coordination

• MOFAIC and embassy attestations

• Corporate bank account support

• Office space lease facilitation

✅ All of the above services are subject to 5% VAT.

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3. Place of Supply Rules

• If the service provider and recipient are both in the UAE, 5% VAT applies.

• If the service provider is in the UAE and the client is overseas, and the benefit of the service is enjoyed outside the UAE, it may qualify as a zero-rated export of services—only if all conditions under Article 31 of the VAT Executive Regulations are met.

⚠️ In most cases, since the benefit of the service is used within the UAE, VAT is applicable.

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4. VAT on Disbursements vs Service Fees

• Service Fees: Always subject to VAT (e.g., AED 5,000 setup fee + 5% VAT = AED 5,250)

• Disbursements (e.g., gov't fees, license cost):

o If charged as-is, on behalf of the client (with proof), then no VAT.

o If marked up or not clearly shown as disbursement, VAT must be charged.

✔️ Always differentiate between your service charges and government/disbursement amounts on the invoice.

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5. VAT Invoicing Requirements

As a registered service provider, you must:

• Issue a tax invoice with TRN (Tax Registration Number)

• Show VAT amount separately

• Clearly label government fees as disbursements (if applicable)

• Mention the place of supply and type of service

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6. VAT Registration Threshold

Turnover (AED) VAT Registration Status

Over 375,000/year Mandatory Registration

187,500–375,000/year Voluntary Registration Allowed

Below 187,500/year No registration required, but optional

Even freelance PROs or consultants are required to register if they cross the mandatory threshold.

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7. Input VAT Recovery

VAT-registered business setup or PRO firms can recover input VAT on:

• Rent and utilities

• Software (e.g., CRM, ERP)

• Office supplies and equipment

• Subcontracted services

• Advertising and marketing expenses

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8. Penalties for Non-Compliance

• Failure to register: AED 10,000

• Late filing: AED 1,000+

• Failure to issue tax invoices: AED 5,000 per invoice

• Errors in VAT return: Administrative penalties + interest

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Conclusion

VAT compliance is essential for business setup consultants and PRO service providers in the UAE. While all professional services are generally taxable at 5%, care must be taken in separating government fees from service charges and determining the correct place of supply. By registering, invoicing, and filing VAT returns correctly, businesses can avoid fines and improve credibility with clients.

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✅ Need Help with VAT Registration or Filing?

Sheikh Anwar Accounting & Auditing LLC offers end-to-end VAT consultancy, invoicing system setup, and return filing services tailored for PROs, consultants, and business setup firms in the UAE.

📧 info@sa-auditors.com

🌐 www.sa-auditors.com