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VAT has been set at 5 per cent on a host of products, but certain segments have been exempted.

The final VAT regulations announced helped  to clear the air for investors and companies in the UAE. Set to be introduced across the Gulf countries, VAT has been set at 5 per cent on a host of products, but certain segments have been exempted, such as basic consumer goods, healthcare and education, etc.

The new law also assigns responsibilities to eligible resident taxable persons including non-residents and investors and their agents as well as nominated representatives who will have to register and ensure specified compliance.

Few Things You Need to Keep in Mind on Tax/Vat Law
  • All taxable persons are required to register under the respective country’s law i.e., VAT and excise, and apply for a Tax Registration Number (TRN) within a stipulated time frame once the new laws are published in UAE, which is expected soon.
  • There has to be the registration and appointment of tax agents and/or a legal representative, who will be responsible for all compliances and for tax payable on behalf of their principals.
  • There are strict penalties for non-compliance including prison terms for key management personnel/owners,who is responsible for compliance and also fines up to five times of the tax due and payable by each taxable person and/ or entity, who is in default including any wilful default of any tax provisions.
Step 1: VAT Advisory services which will consist of:
  • Identification and analysis of the VAT impact on your business
  • Outline the VAT registration obligations and steps for applying for a VAT registration number.
  • Review and amendment of contractual arrangements with customers and suppliers in order to properly map out all transaction types.
  • Analysis of IT system and accounting requirements.
  • Ensure that business is structured in such a manner as to avoid unnecessary cash outflow or absolute VAT costs arising, particularly on inter company transactions.
Step 2: VAT Implementation:

Based on the outcome of the 1st step, our finance and tax teams will be available to implement changes in your IT systems and throughout your organization.

  • We will make sure that the relevant books and records are maintained in the appropriate manner.
  • Ensure that the accounts payable function evidences that Input VAT paid is recovered where permitted as quickly as possible.
  • Ensure that the accounts receivable function understands when Ouput VAT should and should not be charged, and it is accurately accounted for at the correct rates.
  • Update of the invoice templates to ensure that all relevant information for VAT Invoices are included.
  • Assist with the VAT registration with the competent authority.

For small SMEs, we can provide a set-up of a simple accounting systems and implementation of VAT rules, through our outsourced accounting services.

For larger SMEs, we can assist your finance team with the implementation and provide outsource CFO or Finance Manager services on a monthly basis in order to strengthen your team.

Step 3: VAT Training and Post Implementation Support.

We understand that change can be a difficult thing that is why we will deliver tailored VAT training for your teams to assist with the transition in to VAT. Our specialist VAT advisory team will also be on hand to provide post implementation support and guidance during the project to ensure all agreed deliverables are delivered.

Step 4: VAT Compliance
  • Advise on the application of the rules, especially on available exemptions, VAT treatment of intra-GCC transactions, imports and exports;
  • Preparation and filing the VAT returns
  • Assistance in claiming VAT refunds
  • Update of the invoice templates to ensure that all relevant information for VAT Invoices are included.
  • Assessment of the VAT implication related to: new business models, elaborated supply chains, asset purchases and transfers, M&A, etc.
Consultation and Guidelines

Value Added Tax (VAT) is a tax on consumption and it applies to almost all goods and services. As most of the management of the companies might be aware of the fact that as part of diversifying the economy and revenue generation,  the GCC governments have decided to adopt Value Added Tax (VAT).

UAE is also going to adopt VAT which applies to almost all goods and services except basic food items, healthcare, and education.

Though the burden normally lies on the ultimate consumer the business entities need to change the systems, processes, and procedures to comply the new legal requirement which was implemented by the government  from 1st Jan 2018.

Normal requirements under VAT system the companies have to comply:
  • At the time of purchase of goods or availing of services – Ensure that in the case of taxable items whether tax has been properly charged (input tax)by the supplier and details given in the invoices.
  • At the time of sale or provision of services – Apply the rate on the sale value and reduce the amount of input tax to arrive the amount to be paid.
  • Make the payment of tax computed and due within stipulated date to Govt.
  • Filing the VAT returns to the Govt authorities by providing the relevant information requested by the GOVT, within the stipulated period.
  • Maintain proper stock, invoices, accounts, VAT returns, and other relevant records to justify the tax paid at the time of purchase.

The above requirements demand more control and safety on stock, invoices, and records, ensure proper filing system, modification/ upgradations of software, compliance of due dates for collection, payment, and remittance of tax, filing of VAT returns to govt etc. Then the role of the accountant will be very important for the compliance of VAT. Maintenance of accounts and records is also important as per new company law etc.

There will be massive growth of auditing and accounting firms in UAE as the companies will have to keep accurate and extensive records of all the business transactions. These financial firms will help to keep all the documents and allow the management of the company to focus on other important matters.

Availing the VAT-related services which are provided by ALYA Chartered Accountants is a perfect option. ALYA is a reputed auditing firm and can offer you service both in mainland and free zones. This firm is approved by free zones such as Dafza, Jafza, Dmcc, Shams, and many others. For more details, Contact Us. We will be glad to be of service.

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