VAT Guide

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VAT in UAE, Make sure you are registered VAT with Top Intel Management Consultants.

Read carefully VAT FAQ’s and guidelines. Collect all required documents before registration. Ensure document accuracy to avoid possible penalties.

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Complete VAT guide

  1. What is Value Added Tax (VAT)?

VAT is an indirect tax. In business entire supply chain is subjected to VAT. Over 167 countries have implemented the VAT or its equivalent. End users or consumers bear the VAT cost while the VAT registered business collects and pays as business VAT to the government however percentage of VAT is different for consumers and businesses. By the implementation of VAT manufactures (producers) or who are handling the business pays VAT directly to the government which is collected from the consumers. On the whole tax receipts to government reflects the ‘value add’ throughout the business process. 

2. Why VAT is being introduced by the UAE Government?

VAT is other mean of revenue for UAE government. VAT will help UAE government in reducing dependence on oil and other hydrocarbons as a source of revenue. These revenues are used to provide various facilities and services to its residents. Such services include public schools, parks, hospitals, public construction, transportation, entertainment, tourism and much more and these are paid from the government budgets. VAT allows UAE to achieve a new source of income. If UAE governmental budget increases, life style of its residence can be upgraded.

3.from when VAT Law is effective in UAE?

VAT is likely to effective from 1 January 2018 across UAE. By 28th April 2018, VAT registered businesses or organizations need to file their first VAT return (quarterly filing) with Federal Tax Authority – FTA

4.Check UAE VAT Law details from Ministry.

Refer the UAE VAT Law, namely Federal Decree Law No. (8) of 2017 is available in the Ministry of Finance website along with the associated Regulations to the UAE VAT Law. The link to access the VAT Law is https://www.mof.gov.ae/en/lawsandpolitics/govlaws/pages/vat-law.aspx 

5.Required steps to be taken by businesses to get VAT ready.

Several step for VAT readiness:

  • Analyze the VAT impact in current business transactions with the help of VAT service providers.
  • Measure the impact alleviation by restructuring every transaction flow and supply chain.
  • IT readiness in must before filing VAT , take necessary steps for functional modification
  • Ensure smooth transition including stakeholder communication and documentation requirements.
  • Register VAT before implementing the VAT accounting system in your business. 

6.What will be covered within the area of VAT?

Major transactions in services and goods consumed in UAE will come under VAT. UAE government grants very limited ‘exempt’ status for business. For ‘Zero-rate’ tax one need to apply with UAE government, government will cautiously analyze and inspect before giving ‘Zero-rate’ status, accuracy of all business documents is always considered valuable while filing VAT. See below for further explanation.

7.What will be the VAT rate?

UAE has the least VAT percentage of 5% on whole which will be applied to nearly all goods and services. Certain goods and services are exempt and zero-rated that is 0%.Exempt VAT includes: financial transactions like borrowing and lending, leasing of residential property, public transport such as bus, metro and taxi services.Zero-rated VAT includes: Medicines, medical equipments, healthcare, educational services, intra-GCC and international transport and exports of goods and services.

8.Difference between exempt and zero rated goods/services.

Zero rated supply is taxable where Exempt is non-taxable. Input tax credits (the VAT paid on your business inputs) can be recovered in 0% VAT when it comes to exempt no such recovery is allowed. By impacting on current cost structure exempt services can recovered by putting upward pressure on their pricing.

VAT table

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