VAT Implementation in the UAE
The UAE Federal and Emirate governments provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services. These services are paid for using government budgets. VAT provides our country with a new source of income, contributing to the continued provision of high-quality public services in the future. It also helps the government move towards its vision of reducing dependence on income derived from oil and other hydrocarbons. VAT was introduced across the UAE on the 1st January of 2018 at a standard rate of 5%, which is one of the lowest charges in the world. The government of UAE does not collect the tax directly; instead, the traders or companies are responsible for charging the VAT to their customers. This is the reason that a value-added tax is also called an indirect consumption tax. As it is an indirect tax, it is necessary to maintain the records of every transaction where VAT is paid.
Value Added Tax or VAT is a tax on the consumption or use of goods and services levied at each point of sale. VAT is a form of indirect tax and is levied in more than 180 countries around the world. The end-consumer ultimately bears the cost.
Criteria for registering for VAT
A business must register for VAT if its taxable supplies and imports exceed AED 375,000 per annum.
It is optional for businesses whose supplies and imports exceed AED 187,500 per annum.
We offer complete services of VAT registration for our clients. We will review our client’s business activities to identify whether registration is required.
We will conduct the following activities to ensure our client’s satisfaction:
- Complete outsourced solution
- Complimentary assessment of VAT registration obligations
- Advice on registration dates and types
- Guidance on the documentation and information required
- Translation services where required
- Review of all relevant registration material
- Preparation and submission of all application forms
- Setting up accounts on online submissions portals
- Managing all correspondence with the tax authorities
How is VAT collected?
VAT-registered businesses collect the amount on behalf of the government; consumers bear the VAT in the form of a 5 percent increase in the cost of taxable goods and services they purchase in the UAE.
On which businesses does VAT apply?
VAT applies equally to 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 is tax-free.
Filing a return for VAT
At the end of each tax period, VAT registered businesses or the ‘taxable persons’ must submit a ‘VAT return’ to Federal Tax Authority (FTA).
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:
- quarterly for businesses with an annual turnover below AED150 million
- monthly for businesses with an annual turnover of AED150 million or more.
The FTA may, at its choice, assign a different tax period for a certain type of business. Failure to file a tax return within the specified time frame will make the violator liable for fines as per the provisions of Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.
- VAT Return/Tax Return is a periodical statement that summarises the value of the supplies and purchases made by a taxable person during the tax period and shows the taxable person’s VAT liability (the difference between the output tax payable and the input tax recoverable) which is submitted to the FTA (Federal Tax Authority).
- VAT Return is required to be filed by the taxable individual or the individual having the authority to submit VAT Return filing in UAE on behalf of the taxable individual (i.e., Tax Agent)
Purpose of Filing VAT Return filing in UAE
The major purposes of filing a VAT return are:
- Communication of tax information to FTA.
- Finalization of the tax liabilities, schedule tax payments/request refund for overpayment of taxes of the taxpayer within the stipulated period.
- Reduces the risk of tax evasion.
Implications of VAT
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.
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-registered businesses generally:
- must charge VAT on taxable goods or services they supply
- may reclaim any VAT they have paid on business-related goods or services
- keep a range of business records which will allow the government to check that they have got things right.
VAT-registered businesses must report the amount of VAT they have charged and the amount of VAT they have paid to the government on a regular basis. It will be a formal submission and reporting will be done online.
If they have charged more VAT than they have paid, they have to pay the difference to the government. If they have paid more VAT than they have charged, they can reclaim the difference.
It is a difficult task to understand everything about VAT all at once. We are always available to help you out with the understanding and calculations regarding VAT. We offer the utmost accuracy to avoid huge penalties and legal consequences by FTA in UAE. Our VAT experts assist you with the exactness of calculations for enhanced financial management.
We at BookRobo believe in collaborating with our valued clients. Our team would be glad to share the most up-to-date updates and best practices with you.
How to File Your VAT Returns in the UAE?
At BookRobo, we make your procedure for filing VAT Returns a seamless and effortless one. Following the guidelines of the Federal Tax Authority (FTA), we assist taxpayers from dealing with online portal operations to the final payment and seeking refunds, all in compliance with UAE law.
The FTA e-portal is developed to accept VAT returns only in the online mode so as to provide total transparency between client and auditor. Hence, the business is required to provide values manually of their Sales, Output VAT, and Input VAT in the designated boxes of the VAT Return form provided by the FTA e-portal.
It is useful to note that although this text highlights useful concepts to guide you to file your VAT Returns, is not one-size-fits-all for every business transaction. This is where a trusting and dependable Tax Consultant can alleviate the stress of your VAT Return process with unique analysis as per the business at hand, which is essential for precise Tax Reporting and FTA compliance.
BookRobo Certified Tax Consultants, take the hassle out of documentation, filing and compiling all your necessary papers and provide transparency in your VAT Return procedure.
Expert VAT Consultancy in UAE for any type of Business
We employ a personalized approach to servicing clients, ensuring that they benefit from a tailored solution through a dedicated tax consultant in UAE. Your dedicated VAT consultants will help you understand all you need to know about the new policies and regulations relevant to VAT, and advise you regarding the changes that have to be made to your existing business.
Many businesses around the world fail to realize the importance of working with accounting services in the UAE. As a matter of fact, many owners want to take a more engaged and hands-on approach, leading them to neglect the role these professionals play in their company. However, this management strategy can greatly backfire on their organization, leading them to suffer the consequences.
To take a more proactive stance against this, working with bookkeepers and accountants can help their company to reach greater heights. Going beyond increasing their profits, companies who partner up with bookkeeping and accounting firms in UAE can focus on developing and growing their empire. If you belong to a small or medium enterprise, you might want to look into outsourcing your accounting services.
Looking for efficient assistance in the implementation of VAT regulations? You have come to right place. BookRobo has proven its expertise in VAT consulting and can promote its growth with the help of our efficient experts specially trained in dealing with VAT related issues. Regardless of which industry you belong to, our assistance would ensure your business scales to new heights of success.
Besides VAT consultation, our experts can provide several other services including accounting and bookkeeping assistance, auditing support, and tax advisory. We use state-of-the-art infrastructure to offer you the best in class services, and strive relentlessly to improve the quality of the services so that you get all the support from our end to grow your business seamlessly.
Contact us to start today!