Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. The rate of VAT is 5 percent (5%). VAT will provide the UAE with a new source of income which will be continued to be utilized to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
Implication of VAT on Individuals
VAT, as a general consumption tax, will apply to the majority of transactions in goods and services. A limited number of exemptions may be granted. As a result, the cost of living is likely to increase slightly, but this will vary depending on an individual’s lifestyle and spending behavior. If an individual spends mainly on those things which are relieved from VAT, he is unlikely to see any significant increase.
The government will include rules that require businesses to be clear about how much VAT an individual is required to pay for each transaction. Based on this information, individuals can decide whether to buy something
Implication of VAT on businesses
Businesses will be responsible for carefully documenting their business income, costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods/services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.
VAT in GCC
The UAE coordinates VAT implementation with other GCC countries because she is connected with them through ‘The Economic Agreement between the GCC States’ and ‘The GCC Customs Union’.
A step – by – step procedure for VAT registration and de-registration assistance.
Reviewing VAT calculation and treatment on supplies of goods and services at the correct rate;
Reviewing VAT calculation and treatment on purchase of goods and services at the correct rate;
Reviewing VAT calculation and treatment on imports of goods and services;
Reviewing Company’s transactions (i.e. general and administrative expenses) that should not be treated and recorded as Input VAT;
Reviewing calculation of Tax under the Reverse Charge Mechanism on import of Concerned Goods or Concerned Services (if any);
Assisting on the VAT treatment for the supply of goods and services to different Recipients (e.g., transferred to other Emirates, other Implementing states, outside UAE, etc.);
Assisting on the preparation of Tax Return and ensuring completion on the important details that the Tax Return must contain as specified in the Decree-Law; and
Assisting in the proper filing of VAT returns with Federal Tax Authority and payment no later than the deadline set by FTA.
Assessing high level VAT impact on all Company’s transactions;
Communicating plans and conduct VAT-awareness training;
Assisting on the mapping of transactions, accounting entries for VAT returns, Tax adjustments, and tax payment to FTA;
Assisting the Company on the transactions (i.e. general and administrative expenses) that should not be treated and recorded as Input VAT;
Assisting on the calculation of Tax under the Reverse Charge Mechanism on import of Concerned Goods or Concerned Services (if any);
Assisting on the VAT treatment for the supply of goods and services to different Recipients (e.g., transferred to another Emirate, another Implementing states, outside UAE, etc.);
Assisting on the VAT impact between supply of goods and services of Mainland to Designated Zone and vice versa;
Advising and supporting the necessary changes in the IT systems and applications (if any);
Updating the Company on the changes in Tax regulations (e.g., VAT penalties, Vat filing procedures, etc. which is to be announced by FTA);
Communicating with the FTA for any VAT-related concerns to your business structure; and
Assisting the Company and provide guidance associated to any Violations and Administrative Penalties related to the Implementation of the Federal Law No. (7) of 2017 on Tax Procedures.
Assist the taxable person with his Tax obligations according to a contractual agreement between the Person and the Tax Agent, in accordance with the Tax Agent’s duties as stated in the tax legislation.
Without prejudice to any obligations in the Law, maintain the confidentiality of any information obtained in the course of performing his/her duties as a Tax Agent.
Refuse to participate in any work or plan which may result in a breach of any law by any Person or may jeopardize the integrity of the tax system.
Speak with the qualified liquidators at Asad Abbas & Co. (Chartered Accountants).
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