Value Added Tax or VAT is a form of indirect tax imposed on the use or consumption of goods and services at each point of sale. The cost is ultimately borne by the end-consumer. Businesses and organizations collect the VAT on behalf of the government. With the introduction of VAT in UAE on 1 January 2018, consumers are expected to pay 5 percent for the product or service they use. By availing the right VAT services in UAE, you can easily manage the VAT aspects of your business. Being registered under the UAE VAT law stipulates that your business is recognized by the government. Consulting a VAT service provider in UAE eases all your VAT-related processes, thereby making your business abide by the Emirati VAT laws and regulations. CDA is one of the leading VAT service providers in UAE, which offers exclusive VAT services including VAT registration, VAT deregistration, VAT return filing, VAT accounting services, and more.
The United Arab Emirates introduced a new form of indirect tax called Value Added Tax (VAT) in UAE on 1 January 2018 with a rate of 5 percent on goods & services. The VAT policy assumed by the GCC countries potentially widens the economic scope of the countries by integrating an additional source of revenue in the wake of the oil crisis. This new source of income will be utilised for high-quality public services by shifting to a more sustainable consumption system. It also aims to reduce the government’s dependence on oil and other hydrocarbons as a source of revenue. VAT consultancies in the UAE provide various VAT services across the Emirates easing the activities related to Value Added Tax registration, deregistration, accounting, return filing, advisory services, etc. The implementation of VAT in UAE has brought major changes in the taxation system of the Emirate. Getting proper VAT services in UAE helps businesses to avoid the risk of unnecessary tax payments and maintain accurate VAT records, tracking up-to-date information regarding VAT filing.
Value Added Tax or VAT is a tax on the expenditure or use of goods and services imposed at each point of sale. The bearers of the cost will eventually be the end-consumer. Organisations are obliged to collect and account for the tax in aid of the government. VAT in UAE is applicable uniformly on tax-registered businesses running both on the UAE mainland and in the free zones.
A taxable supply refers to a delivery of goods or services made by a company in the UAE that may be taxed at a rate of either 5% or 0%.
Good and Services on which zero-rate (0%) tax rate is levied are Zero-Rated supplies. For zero-rated supplies, input tax can be recovered. Examples:
Goods and Services on which VAT is not levied are Exempted supplies. Also, if all your supplies are in the category of exempted supplies, you are not required to register for VAT. And even you cannot claim for Input tax as well.
Now businesses must have a fresh look at their business model. Proper continuance of accounting records will be one of the initial requirements for any business to endure the new legislation. Appropriate recording of all the invoices, outflows, etc. will be fundamental so that VAT return filing can be made timely without any errors. Only hiring a reliable and experienced VAT consultant can help you ease your VAT processes effectively. To avail the best VAT services in UAE, you need to find a professional VAT consultant who can help you with proper accounting and Value Added Tax Services. At this juncture, outsourcing all accounting services will be the better option for the businesses that lack internal capabilities and sufficient resources to support VAT implementation. A competent VAT consultant improves your business performance, operational efficiency and VAT compliance.
VAT is not an additional burden or cost for the business. In general, every business act as a mediator for the Government. Only the effect is reflected in the cash flow. So, proper planning and effective management of tax collection and its execution will give added value and cash inflows to every business. VAT services help:
VAT Registration is mandatory for those businesses, whose taxable supplies and imports exceed AED 375,000 per annum. Businesses can voluntarily register for VAT if their taxable supplies and imports exceed AED 187,500 per annum. Basically, a business can opt for any of the two types of UAE VAT Registration process:
1. Mandatory Registration
The threshold for mandatory registration of a business is AED 375,000. But this threshold is not applicable to foreign organisations.
2. Voluntary Registration
The threshold for voluntary registration of a company is AED 187,500.
Staying compliant with the tax laws of the land is crucial for all the businesses. Getting the insights of the VAT registration procedures is one such crucial compliance requirement. Under the VAT, the registration could be mandatory registration or voluntary registration.
Under mandatory registration, any business with taxable supplies being more than AED 375,000 made within the duration of 12 months must get registered under the VAT within 30 days from the date of exceeding the specified threshold.
Under the voluntary registration, any business with the taxable supplies being more than AED 187,500 can make the choice of getting registered under the VAT law voluntarily.
The registration procedure would include the following procedures:
Businesses are required to maintain proper records to file the VAT returns for your following transactions:
a) Local Sales falling under normal VAT procedure,
b) Taxable Export Sales (GCC Sales),
c) The VAT Exempted sales,
d) Local Purchases and Import Purchases.
d) Zero-rated Export Sales.
It is indispensable that organisations should try to understand the implications of the new taxes and make every endeavour to line up their business model to government reporting and compliance provisos. Businesses may need to make some changes to their mainstay operations, accounting and book-keeping, technology, and maybe even to their human resources to wholly abide by the UAE VAT legislation.
VAT implementation in the UAE has brought some fundamental positive changes to the region that are discussed below.
All the VAT registered organisations or the ‘taxable persons must submit a ‘VAT return’ at the end of each tax period to the Federal Tax Authority (FTA). VAT return filing declares how much VAT is to be paid by the taxpayer or reimbursed by the tax authorities. A VAT return recapitulates the assessment of the supplies and purchases a taxable person has made during the tax period and shows the taxable person’s VAT liability.
VAT Liability is the distinction between the output tax payable (VAT charged on supplies of goods and services) for a specified tax period and the input tax (VAT incurred on purchases) recoverable for the same tax period.
VAT Liability is calculated taking into account the following factors:
If the output tax exceeds the input tax amount, the difference must be paid to the FTA. If the input tax exceeds the output tax, the taxable person will have the excess input tax recovered. He will be at liberty to set this off against subsequent payment owing to the FTA.
Businesses have to file for tax returns electronically through the FTA portal ‘eservices.tax.gov.ae’ and fill in Form 201:
Form 201 is a statement that is required to be made by the taxpayer by the end of every tax period. It involves:
The standard tax period for VAT return is:
The businesses are liable to charge the tax to the customers based on the output and input tax.
Output tax is the VAT collected on selling goods or providing services to the clients. Input tax is the VAT paid on purchasing raw materials for the goods or services.
Hence, the formula for VAT assessment is:
VAT = Output Tax – Input Tax
It is mandatory for the eligible entities to comply with the VAT regulations in order to avoid any hefty fines. Under the VAT law in the UAE, if there is any non-compliance with the VAT regulations, it will result in penalties.
The VAT penalties would include the following:
The implication of the VAT on businesses might be different based on the business type and nature; the general implication would be as per the example below of a cooking oil.
Step 1: Sunflower Farmer
The farmer who grows and produces the sunflower would harvest the sunflower seeds and would sell them to an oil mill, collecting the VAT and remitting it to the government.
Step 2: Oil Mill (Manufacturer)
After getting the seeds, the oil mill would extract the oil from the seeds, would pack it, and would sell it to the distributor and would collect the VAT from the distributor along with claiming the input VAT for the tax paid to the sunflower farmer.
Step 3: Distributor
When the distributor receives the product (sunflower oil), it would sell it to the supermarket or any retailer, thereby charging the VAT, and would claim a refund for the VAT paid to the oil mill.
Step 4: Retailer
When the retailer buys the oil from the distributor and sells it to the end consumer, the retailer would charge the end VAT from the consumer and would claim the VAT credit from the distributor's invoice.
Step 5: Consumer
In the last step the end VAT burden will be borne by the consumer itself on purchase of the sunflower oil.
This is how the VAT is applied in general to the businesses.
Ignorance is bliss, but it is a blunder in the case of VAT. Businesses that fail to comply with the rules and regulations of VAT may have to face serious penalties that may harm the goodwill of the business as well as the reputation of the businessman in the market. Besides providing top-notch VAT services in UAE, CDA offers Tax Consultancy Services and Implementation and Tax Reclaim Services at a very reasonable charge. Having a huge number of clients, CDA is acclaimed as a leading platform that has been dealing with VAT services in UAE of start-ups and established businesses across the Emirates. CDA also provides Accounting & BookKeeping Services, Accounts Outsourcing Services, Internal Auditing Services, and a lot more other services related to the business in the UAE.
If you are looking for any services related to VAT in UAE, feel free to contact CDA; our vat consultants will be always there for your assistance to provide the best VAT services across the Emirates.
To register for VAT in UAE, you need to sign up an e-service account by logging into https://eservices.tax.gov.ae and provide the details as required. Then, log in to your account and start the VAT registration on clicking ‘Registration for VAT’ on the dashboard.
If the ‘Non-residents’ make taxable supplies in UAE, they are required to register for VAT, provided there is no UAE resident responsible for VAT accounting on these supplies. Non-residents can register for VAT in UAE with the help of a tax consultant.
No. A registered taxable person will issue a Tax Invoice as defined by FTA. There are two kinds of invoices: Simplified Tax Invoice specifically for supermarkets as well as retail industries and detailed Tax Invoice.
Once the claim for refund is submitted, FTA will review the application within 20 business days and notify the applicant (taxable person) via email, the acceptance or rejection of the submitted claim. Once your claim is approved, the refund will be made within 5 business days.
Yes, they can claim subject to Vat Law. There are various VAT refund schemes benefitting and supporting the UAE Nationals, even for those who are unregistered. This scheme is available to those constructing new residences in UAE solely for the use by the owner and family.
Yes. The tax paid on the import of goods is eligible for input tax recovery. This can claim back through the Reverse Charge Mechanism.
Yes. Fuel expenses specifically for business purposes can be claimed.
The VAT exempted supplies in Dubai includes financial services including life insurance and reinsurance of life insurance; financial services that are not conducted for an explicit fee, discount, commission, rebate or similar type of consideration; residential buildings other than the residential buildings which are specifically zero-rated; bare land and local passenger transport.
No. Businesses supplying exempted goods or services are not allowed to claim input tax paid on purchases. The input tax paid would be considered as a cost to the company.
The exemption of VAT is provided based on certain supplies of goods and services, which would include the residential properties, life insurance, public transport services, and any financial services.
A VAT invoice is the tax invoice that is to be issued by the seller who is registered under VAT for the sale of any taxable goods or services.
The deadline for filing the VAT return is within the 28 days from the date when the tax period ends.
You should maintain the VAT records and documents for at least 5 years.
Yes, you may get registered under the VAT if turnover is more than stipulated amount under VAT law
In most cases you won’t be able to get the VAT until and unless you have the receipt or related valid document that might be proof of the VAT transaction.
Yes, sole traders would be required to pay VAT if the turnover exceeds the stipulated threshold.
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