The Federal Tax Authority of the United Arab Emirates has now opened its official VAT registration portal, allowing eligible businesses to register for VAT starting 1st of October, 2017. VAT will be effective from 1st of January, 2018 at
the rate of 5%.
It is mandatory for businesses that are resident and operating in the UAE to register for VAT if they make taxable supplies in excess of the VAT registration threshold of AED 375,000 per year. Voluntary registration shall be available to businesses which make taxable supplies above AED 187,500 per year. The Authority shall issue an Administrative Penalties Assessment for taxable businesses failing to submit a registration application by 31st of December, 2017.
Value Added Tax (VAT)
Value Added Tax (VAT) is an indirect tax. This type of tax is collected incrementally and referred to as general consumption tax. It is a tax that is derived from value added to the production or sales/distribution stages and in most cases, it is a tax that is destination-based. In some countries, it is referred to as GST – Goods and Services Tax.
Assessing Tax Awareness
The way companies function can be affected by the new tax introduction especially in the areas of price models and account management. Businesses will need to ensure charges are made correctly so as to avoid a review of its financial systems and mode of operation.
The tax that is going to be adopted in the UAE is going to apply to a large number of goods and services. However, the implementation of the VAT isn’t going to include in education and healthcare. Before the new VAT system takes effect on Jan 2018, business organizations need to gear up for the new system requirements, procedures, and processes in order to comply with current legal framework even though the consumer is the one that bears the burden. There are several zero-rated items, while others are standard or zero-rated. A business organization’s annual turnover will be the criteria for the registration of VAT.
VAT System Compliance Requirements for Companies
- If you are dealing with taxable items ensured that the supplier charges the appropriate tax and that the invoice carries this information at the point of sale.
- To deduce the cost of a service or sale of an item, the rate should be applied to the sale value while the input tax amount should be reduced.
- Make payment documents available to the government when due.
- Provide relevant information the government requests when filing VAT returns.
- Proper stock should be maintained including accounts, invoices, VAT returns and other records that are relevant to justify time of purchase tax
Accounting Records Importance
The requirements stated above will require further control and the safety of stock, records, and invoices, and ensure a proper system of filing, collection date compliance, software upgrade or modification, remittance and payment of tax, and VAT returns filings to the government.
All of these requires a competent account in order to comply with the new law.
NEX Consultants UAE VAT Advisory Services:
To effectively evolve into tax payable systems, companies need to take a number of measures. Some of these measures include making reasonable assumptions in business plans based on its economic effect, assessing how its operating structure and supply chain is going to be affected by tax, financial system analysis to determine readiness, reassessment of contracts to reposition tax clauses etc.
- We will identify what needs to be addressed in your business by performing an impact review.
- Assess if there are any process changes needed by reviewing business processes and your business’ system of accounting.
- We are providing full-fledged assistance and advisory on VAT filing in UAE
We work with international VAT experts. We will hold workshops and seminars where necessary in order to provide contemporary advice on the implementation of the proposed VAT and the impact on the business of clients. We are the professionals you need to set your business on the right path. Contact us today.