VAT rules can be complex and the implications are not always considered. Implementation of VAT needs careful planning for its success. Our dedicated VAT team will help you consider every stage of the implementation process.
The United Arab Emirates introduced a new form of indirect tax called Value Added Tax (VAT) on 1st January 2018 with a rate of 5 percent on goods & services. The VAT policy assumed by the GCC countries potentially widens the economic scope of the countries by integrating an additional source of revenue in the wake of the oil crisis.
This new source of income will be utilized for high-quality public services by shifting to a more sustainable consumption system. It also aims to reduce the government’s dependence on oil and other hydrocarbons as a source of revenue. Read more to understand the need for VAT consultancy services for business in UAE.
Only those businesses crossing the defined annual aggregate turnover threshold are liable to register under VAT. Based on the registration threshold, a business will either be mandated to register or as an option, a business can apply for registration or can seek exemption from VAT registration
On this basis, VAT registration in UAE can be classified into the following:
In UAE VAT, businesses whose annual turnover exceeds the mandatory registration threshold of AED 375,000 and the voluntary registration threshold of AED 187,500 are allowed to apply for VAT registration. Therefore, it is crucial for businesses to understand what type of supplies are considered in deriving the annual supplies turnover and how to calculate the VAT turnover for registration in UAE.
In UAE VAT, any person conducting business is not allowed to have more than one Tax Registration Number (TRN), unless otherwise prescribed in the UAE Executive Regulation. Thus, even if you are operating via branches in more than one Emirate, only one VAT registration is required. With a similar objective, if two or more persons are related or associated parties in the businesses, they are allowed to apply for VAT group registration.
VAT-registered businesses collect the amount on behalf of the government; consumers bear 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 imposes VAT on tax-registered businesses at a rate of 5 per cent on a taxable supply of goods or services at each step of the supply chain.
Tourists in the UAE also pay VAT at the point of sale.
VAT applies equally on tax-registered businesses managed 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.
Taxable businesses must file VAT returns with FTA on a regular basis and usually within 28 days of the end of the ‘tax period’ as defined for each type of business. A ‘tax period’ is a specific period of time for which the payable tax shall be calculated and paid. The standard tax period is:
Business Impact Assessment, review of key documents like existing contracts and incorporation of VAT clauses in the existing and new contracts and related documents.
Advise, develop and assist in restructuring transactions, supply chain and other related processes, Advise and support for requisite changes in the IT systems and applications.
Assist in VAT registrations and in the preparation and filing of VAT returns. Align compliance practices with VAT requisites.