The UAE Government has announced that it will introduce a Value Added Tax (VAT) system in the country, which will be effective on January 1, 2018. The VAT scheme, which is expected to impose a 5 percent rate on goods and services, will be used for public infrastructure and services, such as “hospitals, roads, public schools, parks, waster control, and police services,” according to the website of the Ministry of Finance.
As a member of the Gulf Cooperation Council (GCC), the UAE will be working with other GCC member countries to identify the best possible framework for implementing VAT across the region. Other GCC countries are also set to implement a similar tax scheme in the same year or in 2019.
What does the Value Added Tax mean for consumers and businesses in UAE?
The VAT will be applicable on most goods and services that are bought and sold, with the exception of education, healthcare, and basic food items. Consumers will primarily shoulder the added cost and businesses will collect and report the associated VAT charges, together with their revenues and expenditures. In essence, businesses will act as tax collectors for the government.
The Value Added Tax programme is only applicable to businesses that meet a particular minimum annual revenue requirement. Businesses that do not meet this minimum annual turnover requirement (e.g., small businesses) will not be required to register for VAT, as well as businesses providing goods and services that are not covered by the added tax.
VAT-registered businesses are mandated to document all their financial transactions and maintain accurate and updated records. A VAT-registered business should:
1- Apply VAT on all taxable goods and services it provides
2- Update and maintain its financial records, which will be checked by the government to ensure full compliance and accuracy
3- Reclaim VAT charges it spent on business-related goods and services, if applicable
4- Report VAT charges it made and paid to the government*
*If a business charges more VAT than what it paid, it must may the difference to the government. Meanwhile, if it pays more VAT than what it charged, it can reclaim the difference from the government.
Businesses that think they should be excluded from VAT are advised to document and maintain their financial transactions to enable the government to determine if they should be registered or not.
How our tax consultants can help your business in Dubai and UAE
NAM Associates have a team of expert tax consultants in Dubai that can help businesses and entrepreneurs navigate the new policies and requirements involved in the implementation of Value-Added Tax in the UAE.
Our tax consultant in Dubai can help your financial team and accountants be updated on the latest developments regarding the programme. We will help you prepare and meet requirements to comply with your tax obligations. In addition, our tax consultants can help your team modify your internal operations, such as financial management planning and bookkeeping activities, in line with the new programme.
Our VAT consultant in UAE will help you have a clear and complete understanding of the new tax programme, especially once it has been implemented. With NAM Associates as your tax consultant in UAE, you can be sure you are fully prepared and equipped for the change.