Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. While offering limited exceptions to certain categories including basic food items, healthcare, and education, the rate of VAT being collected is 5 per cent. VAT provides the UAE with a new source of income which will be continued to be utilised to provide high-quality public services. It also helps the government to move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
VAT applies uniformly on tax-registered industries accomplished on the UAE mainland and in the free zones. However, if the UAE Cabinet defines a certain free zone as a designated zone, it must be treated as outside the UAE for tax purposes. The transfer of goods between designated zones are tax-free.
Businesses shall keep accounting records, commercial books and tax-related information as specified in the respective tax law.
All businesses with annual revenue of Dh 375,000 or more are mandatorily required to acquiesce their VAT registration, within 30 days of achieving these proceedings. It is optional for businesses whose supplies and imports exceed AED 187,500 per annum. As per the Regulatory Authority
Federal Tax Authority Registration (FTA), all businesses in the UAE are obligated to certify the recording of their financial operations. Apart from the VAT registration requirements, all ledgers must be updated in time in order to avoid any penalties.
There are a couple of documents required that come with registering with the VAT in UAE. The nature of the organization matters in registration.
For an entrepreneur applying for a VAT certificate as an individual, the subsequent is required:
For entrepreneurs registering as an authority, the subsequent is required:
The prerequisites for a Dubai-based corporation registering for VAT are as follows:
Once the appropriate systems and processes are in place, Brooks Management Consultancies can help with the administration of VAT in your business, to ensure you comply with the new requirements such as:
Keeping the correct documentation in relation to invoices, records, account, VAT returns
VAT-registered industries collect the amount on behalf of the government; customers accept the VAT in the form of a 5 per cent increase in the cost of taxable goods and services they purchase in the UAE.
UAE levies VAT on tax-registered industries at a rate of 5 per cent on a taxable supply of goods or services at every stage of the supply chain.
Tourists in the UAE also pay VAT at the point of sale. However, tourists and can request VAT refund on purchases made during their visit to the UAE. Recovery of payment is performed through a completely incorporated electronic system which links retailers registered in the ‘Tax Refund for Tourists Scheme’ with all ports of entry and exit from the UAE.
Lack of familiarity with VAT is a significant obstacle, particularly for businesses that have relatively basic accounting systems, and some small businesses may not even keep formal records. Expert advice and guidance are needed so that businesses can map their activities and understand their VAT liabilities across the supply chain.
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