VAT service providers in UAE | What is VAT | VAT in UAE

VAT in UAE: The GCC (Gulf Cooperation Council) countries have decided to implement VAT. In the second half of this year the Finance Ministry will start registering companies for value added tax that are above the yearly threshold as the country gears up for applying the 5% levy from January 1 2018. For the Gulf Cooperation Council (GCC) governments VAT will be another source of generating incomes. The UAE businesses have to record their financial transactions make sure that all financial records are accurate and updated. Based on the financial records the businesses having minimum annual turnover will be needed to register for VAT. The businesses that do not meet the criteria of annual turnover and think that they don’t need to register for VAT should maintain their financial records, incase government may establish if they should be registered.

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What is TAX?

TAX is the source through which governments’ raises income for public services. The government uses income collected from taxation paying for public schools and universities, defense, hospitals, etc.


VAT (Value Added Tax) is an indirect tax. Sometimes VAT is also mentioned to as a type of general consumption tax. In a country which has a VAT, it is levied on most supplies of goods and services that are bought and sold.

VAT is one of the most common types of consumption tax found around the world. More than 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia.

At each step of the supply chain VAT is charged. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.


The tax collected from the customers is paid to the government by the businesses while it may also receive a refund from the government on tax that it has paid to its dealers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.

OBM Overview: - The subject tax is a new concept in UAE which need more awareness among the business world irrespective of size. The new theme introduction should strike the right person without any ambiguity.

Our Role:-We give proper guidance for accounting, calculation and online payments on time.



What is VAT?


Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.

One of the most common types of consumption tax which is found all around the world is VAT. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia. At every step of ‘supply chain’ VAT is charged. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government. The tax paid by a business to the government is that it collects from the customers while it may also obtain a refund from the government on tax that it has paid to its dealers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.

OBM Overview: The VAT Collected from the customers should reach government on time, and the great solution to perform this is through OBM. No worries if paid excess or deficit, OBM serves better for refund claim within no time.

Our Role: - We assure the safety of your money to reach right hands



Why is the UAE implementing VAT?


The different public services like hospitals, roads, police services, parks, etc. provided by The UAE Federal and Emirate governments to the residents and citizens. The payment for these all public services is generated from the government budgets. By implementing VAT the country will get a new source of income which will fund to the continuous delivery of high quality public services in the future. This will also pave the way to help government to reduce the dependency on oil and other hydrocarbons for revenue and move towards its vision.

OBM Overview: As a part of welcoming the new system OBM plays a key role in serving the country and development in various government initiatives.

Our Role: Rebinding the trust of the client (business) and government.



Will all businesses need to register with the government for VAT?

There is no need to register for VAT by all businesses. The businesses that meet minimum annual turnover will have to register with government for VAT. It means that the small businesses that don’t meet the criteria will not have to register for VAT. This decision will protect small businesses from wide reporting and documentation system as VAT requires. The businesses that only provide goods and services which are not subject to VAT also not need to register.

But all the businesses in UAE should record financial transactions and make sure that their all financial records are accurate and up to date. The organizations or businesses that think they don’t need to register with the government for VAT should maintain their financial records in any occasion, in case the government needs to establish whether they should be registered.

The important point is that the government has not yet concluded the particular conditions like minimum annual turnover, etc. which will help to distinguish the businesses that do not need to register with the government for VAT.

OBM Overview: OBM helps the accounting and reporting for any business concern irrespective of the size. The financial transaction and relates are safe with OBM and serves as the per the Government rules and regulations.

Our Role: Safeguard the client with right decision on the right time. Functioning as an advisor for any queries related to the subject.



VAT-registered businesses generally:

If your business is registered for VAT you must report the VAT amount charged for you and the amount you paid to government on a regular basis. This will be an official submission and it is probable that the reporting will be made online.

If the amount of VAT charged is more than you have paid then you have to pay the difference to the government. And if the amount you paid is more than you have charged then you can reclaim the difference.

OBM Overview: We deal with confidential data with updated financial postion reporting to the client. All the government related and other docs will be safe with us.

Our Role: The scope of OBM is for daily basis reporting, VAT calculation and online payment within cut off time with minimal escalation. We assure the proper recording of all transactions and safety.



What does a business need to do to prepare for VAT?

The businesses will have the time to get ready before VAT will come into effect. Throughout that time the businesses should meet necessities to fulfill their tax obligations. The businesses can begin now so that they will be prepared later. The businesses need to make few changes in their core operations book-keeping and financial management, human resources, technology, etc. to comply totally with VAT. It is important that businesses try to understand the implications of VAT now and once the legislation is issued make every effort to align their business model to government reporting and compliance requirements. The final responsibility and accountability to comply with law is on the business.

OBM Overview: Be prepared for welcoming Tax. We assist all types of businesses to meet requirements and fulfill their tax obligations

Our Role: OBM act as financial advisors, accountants, tax advisors etc.



When are businesses supposed to start registering for VAT?

Registration for VAT is expected to be made available to businesses that meet the requirements criteria three months before the launch of VAT. Businesses will be able to register online using eServices.

OBM Overview: Registration for any licenses are essential part for any business.

Our Role: We assist all clients for speedy procedures and eservices.



How often are registered businesses required to file VAT returns?

The VAT return submission is expected on a regular basis for registered businesses. The default period for filing VAT returns for the majority of businesses is expected as three months. The return can be filed through online eServices.

OBM Overview: VAT Returns on daily basis. Proper records submission process.

Our Role: Filing returns and online e services.



What kind of records are businesses required to maintain, and for how long?

The businesses will need to maintain the records which will allow the authorities to identify the details regarding the business activities and to review transactions. The details regarding the documents which will be required and the time period for maintaining them will be informed by the authorities.

OBM Overview: The secured data and records with OBM.

Our Role: Proper channel of communication and recordings by well-trained staffs.



What kind of records are businesses required to maintain, and for how long?

The businesses will need to maintain the records which will allow the authorities to identify the details regarding the business activities and to review transactions. The details regarding the documents which will be required and the time period for maintaining them will be informed by the authorities.

OBM Overview: The secured data and records with OBM.

Our Role: Proper channel of communication and recordings by well-trained staffs.



Changing my business systems for VAT reporting will cost money. Can the government help?

The government will provide information and education to businesses to make them aware of VAT and to help them make the transition. The government will not pay for businesses to purchase new technologies or hire tax specialists and accountants. That is the responsibility of each business. The government will provide guidance and information to support you and will give businesses time to prepare.

OBM Overview: Being intermediary for the business and the government and guide the business on proper route.

Our Role: Being active in all support related to VAT and Tax matters.

When will VAT be implemented?

VAT will be introduced in the UAE, along with other Gulf countries, from the beginning of 2018 at 5 per cent.

How does it work?

Companies in the UAE that report annual revenues of over Dh 3.75 million will be obliged to be registered under the GCC VAT system, the Undersecretary of the UAE Ministry of Finance, Younis Al Khoury, said.

Al Khoury also confirmed that companies whose revenues fall between Dh1.87 million and Dh3.75 million will have the option to register for VAT during the first phase of the VAT implementation.

He also mentioned that it will eventually become obligatory for all companies to be registered under the system, when it is rolled out in the second phase, regardless of the reported revenues.

What will be exempt from the tax?

The UAE government has already announced that 100 food items, health, education, bicycles, and social services would be exempted from VAT.

What will be taxed?

Electronics, smart phones, cars, jewellery, watches, eating out, and entertainment will fall under the taxed category. GCC countries are also expected to introduce excise duties on certain beverages that are deemed to be harmful to health, including those with high sugar content.

Will VAT be a cost to the business?

Where you are engaged in the supply of goods or services that are subject to VAT (including at the zero rate) you will be entitled to reclaim VAT you incur on costs. Where you are engaged in activities that are exempt from VAT and you cannot reclaim VAT incurred on costs, VAT will be a cost to your business (as suppliers will charge VAT that you cannot reclaim).

Will this impact economic growth of the UAE?

Our analysis suggests that it will help the country strengthen its economy by diversifying revenues away from oil and will allow us to fund many public services. This is a sign of a maturing economy.

Will I pay VAT every time I purchase something at the grocery?

No. There will be a number of items in your shopping cart that will be VAT-exempt. Younis Al Khouri, undersecretary at the Ministry of Finance, has said that GCC states had already agreed to exempt about 94 food products, as well as the healthcare and education sectors. That means your grocery, hospital or school bills will most likely remain unchanged, unless there are price hikes. A new law, however, has yet to be released to specify which items are non-taxable.

How about buying airline tickets, will it also be taxable?

Since the VAT law is not out yet, there is no definitive answer to this. But judging by the VAT implementation in other countries, there is a likelihood that the price of airfares won’t go up because of VAT. “We will have to wait and see, but if we look at examples in other countries, for instance in the UK as well as in Singapore (where VAT is called GST), passenger transport carries VAT at zero percent. So, it is expected that air tickets in the UAE may be carrying similar VAT rate of zero percent,” said Pardasani.

Will the 5 per cent VAT increase the cost of living in UAE?

The cost of living will likely go up slightly for a lot of people, but this will all depend on the individual’s buying preferences and lifestyle. If you keep on taking home things that are taxable and maintain an expensive lifestyle, expect your outgoings to increase. “If you ask me, I don’t think 5 per cent will break the bank,” said Pardasani, when asked whether VAT will make dining at restaurants costlier. “If one is to spend mainly on items which are not attracted by VAT, then the cost of living of the individual is unlikely to have any significant increase,” according to the Emirates Chartered Accountants Group.

Will businesses be penalised if they don’t collect VAT?

Businesses are encouraged to implement the new tax system, but the Ministry of Finance said that the government is currently in the process of defining the exact fees and penalties for non-compliance.

When will registration for VAT begin?

If the initial date for the VAT roll-out is followed, businesses can probably start registering for VAT from 1st October 2017. As announced recently, the registration will be open three months before the go-live date. Companies will have the option to register online.

How often are companies required to file VAT returns?

For most businesses, VAT returns should be filed every three months. Filing of returns can also be done online using the government’s eServices.

should companies start hiring VAT professionals?

Hiring new staff that will enable businesses prepare for and implement the new tax policy should be done at this point in time. “Companies should have started to think about the additional resources they would need to ensure VAT compliance. Depending on how tedious / frequent the process is, companies would need resources based on the complexity of their operations. But one thing to bear in mind is that VAT is not only a finance issue,” said Pardasani. “It flows through all operational departments of the company. This is because wherever a company acquires products or services, it may pay VAT and it would need to capture all the documentation relating to VAT paid, in order to claim refunds.”

Compliance requirements under VAT


Registering for VAT

Businesses and individuals engaged in any business activity whose turnover exceeds the mandatory VAT registration threshold specified by the respective national VAT laws must register for VAT. Voluntary VAT registration will be optional where the business turnover is below the mandatory VAT registration threshold – careful consideration should be given to the potential amount of VAT reclaimed on purchases by the business as well as the compliance costs in administering and reporting the tax, before making such a decision. Businesses not registered for VAT cannot charge VAT on their sales and cannot claim any VAT incurred on their inputs.

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Invoices

The process of charging VAT on supplies of goods and services requires businesses to issue VAT invoices. A VAT Invoice is a document that must be produced and issued by VAT registered businesses to provide documentary evidence of the sale of goods and services in compliance with the VAT law. A VAT Invoice is also required by the business as documentary evidence to support VAT credit claims, i.e. VAT incurred on the acquisition of goods and services for the purposes of the business can only be claimed if the business holds a valid VAT Invoice from the vendor.