Value Added Tax (VAT) is charged at each step of your supply chain. The consumers need to pay the VAT cost while Business collect and account for the tax. If you’re looking for VAT related help in UAE, UnitedVAT.com could be your most sought after partner in this regard. Being an established accounting service provider, our experts are here to help your businesses to get ready for the value added tax. The newly launched tax is basically a consumption tax and applies on most goods and services.
Though VAT implementation is a new tax system in UAE, it is widely accepted in different parts of the world. It is to note that more than 150 countries are already following the value added tax system. We believe the decision to implement VAT would cause exemplar shift in the business crescendos of the nation as well as the region. Similar to most of the countries across the world, businesses in the Gulf region also will now have to adhere to stringent VAT regulatory and statutory compliances and report the same on a periodic basis. The challenge for the business community in the Gulf will be to understand the new VAT Law and implement the same well before the due date.
UAE and associate GCC nations in the form of Value Added Tax (VAT) on all goods and services at a standard rate of 5% with effect from 1st January 2018. Now the question is that Will consumers spend take a hit or it will be business as usual for the retailers and manufacturers?
The new value-added tax (VAT) is coming into effect from 1st January 2018 for the very first time in UAE, Ultimately it will affect small businesses as well, main concern of small businesses is all about the financial and operational impacts of VAT compliance, especially since they’re used to operating in a low-tax business environment. Most people have a preconceived notion that VAT is a burden for all including small businesses. However, if your business is organized with the help of a VAT expert, VAT may not be too onerous to you.
VAT in UAE is to be implemented from 1st January 2018.
- Local Transport.
- Residential Real Estate, including long term leases on residential properties.
- 100 other Essential items.
Taxable person having revenue of more than AED 375,000 in year or expected in next 30 days shall be compulsorily liable to register for VAT. Optional registration limit is AED 187500 for last 12 months or next 30 days.
- VAT Registrations shall begin in Third Quarter of 2017.
Recipient of Supply must be a taxable person (i.e. end consumer cannot claim VAT refund or credit)
- Tax should be charged correctly.
- The recipient of the supply must supply the documentary evidence.
- The goods and services received are for making further taxable supplies (i.e. only business which make further sale shall be entitled to reclaim credit on VAT Paid)
- VAT input tax credit can be claimed only on the amount paid or intended to be paid in 6 months by the recipient.
The significance is that each VAT registered business entity becomes automatically the agent of the government to collect from customers and pay it back to the Government Authority. VAT is charged at each stage of the ‘supply chain’. Ultimate consumers generally bear the VAT cost. The Businesses act as tax collector for the government authorities. The difference between the VAT charged on customers and the VAT paid to suppliers will be either paid to or reclaimed from the government.
As per the official site of Ministry of Finance, UAE, it is expected that majority of the business entities will be required to file the VAT returns on quarterly basis, within one month/28 days from the end of the respective quarter.
All business entities in UAE:
a) Registered for UAE VAT or not should maintain proper records of their business transactions and ensure that all financial records are accurate and up to date.
b) Should register under UAE VAT if they are coming under eligibility criteria based on turnover.
c) All UAE VAT registered business entities should charge VAT on supply of taxable goods or services.
d) All UAE VAT registered business entities may reclaim any VAT they have paid on goods or services within the country.
e) Should maintain correct and accurate business records for government scrutiny to ensure that that business entities adhere to the mandatory requirement stipulated by the UAE VAT Law.
f) All VAT registered business entities must report the amount of VAT they collected and the amount they paid to the government on a regular basis. The Tax authority will open an online portal for submitting this record on a periodic basis (called VAT return).
If VAT charged on customers is more than the amount charged by the supplier and service providers, then the excess amount collected has to be paid to the VAT authority. Similarly, if the amount of VAT on the purchases and service providers are more than the amount charged on customers, the refund can be claimed for the difference.
As per the information available from media, the UAE government is not considering of introducing personal income tax in the country.