The UAE along with the rest of the GCC countries are ready to introduce VAT (Value-Added-Tax) charge on the supply of goods and services. According to the head of the UAE Federal Tax Authority, the UAE will open online registration for tax purposes for businesses in mid-September 2017.
Excise tax at a rate of 50% to 100% is going to be imposed from October 01, 2017. The importers, manufacturers, and stockpiles of carbonated drinks, energy drinks and tobacco products are required to get registered for Excise and file monthly declarations of import and production.
We have expert Excise advisors that can completely take care of your excise requirements including preparation, impact assessment, registration, filing of returns and record keeping.
VAT is an indirect tax that is collected for the government by an intermediary (e.g. the Companies) from the physical persons or other companies that ultimately pay the tax. VAT is imposed on both goods and services (as opposed to sales tax which is imposed on transactions involving goods only) and is charged throughout the supply chain, including on the final sale.
How VAT works
The proposed implementation across in UAE and other GCC Countries is expected from 1st January 2018 at a likely rate of 5%.
Business are obliged to register for VAT purposes provided that they supply goods and services that fall within the vat able categories and also their annual taxable supplies will exceed the registration threshold (375,000). Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold (187,500).
VAT of 5% will be applied on the majority of transactions in goods and services. However, there are certain supplies that will be zero rated (0%) supplies such as export of goods and services outside GCC, educational services and healthcare services and also other supplies that will be exempt of VAT charge such as supply of financial services, residential properties, bare land and local transportation.
In general, VAT registered businesses must charge VAT on the supply of goods and services and can reclaim any VAT on the goods and services they have incurred. If they have charge more VAT they will have to pay the difference to the government whereas if they have incurred more VAT than charged, they can claim the difference.
All business will be obliged to keep proper records of their financial transactions and ensure that their financial records are accurate and up to date. VAT return form submission will be done every 3 months.
For GCC countries introducing VAT on 1st January 2018, the official registration is expected to commence in mid-September 2017.
Importance for Companies
VAT rules can sometimes be complex without considering and all the implication involved. The implementation in the business needs proper planning and will need to make some significant changes in their core operations, financial management and bookkeeping and possibly their technology used (i.e. accounting software).
The governments urge that everyone will fully comply with their VAT responsibilities and there are defined fees and penalties for non-compliance.
Tax experts have warned that VAT comes at a cost and exposure to penalties if not administered correctly. Companies and traders who are consistently in a position of recovering VAT from the government will need to factor in the potential negative cash flow impacts that their business will be exposed to as well as the likely additional scrutiny their books and records will be subject to by the tax authorities.
How can we help?
With the imminent introduction of VAT in the UAE and the GCC in general, we can provide innovative tax solutions and services, tailored made, to each client’s needs.
We can share with your Company information, implement our knowledge and experience into your business needs and provide to your business in-house solutions, so that your transition into the VAT new era will be as smooth as possible.
Should you be interested in our VAT services including but not limited to the following:
– VAT impact assessment & preparedness
– VAT procedure manual
– VAT awareness sessions
– Timely Registration & filing of VAT returns as governed by Laws.
– Maintenance of proper records of books as prescribed by laws.