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Value Added Tax (or VAT) is an indirect tax also referred to as a type of general consumption tax imposed on most supplies of goods and services that are bought and sold at each steps of supply chain and Over 150 countries have implemented VAT.
Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.
All businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case we need to establish whether they should be registered.
How does it work?
Tax in UAE
Excise Tax from 1st October 2017
VAT from 1st January 2018
Compulsory: If taxable turnover exceeds AED 375000
Optional : If taxable turnover exceeds AED 187500
Tax Rate Standard @ 5%
Apply to the majority of transactions of goods and services unless specifically exempted or excepted by law
Zero Rated @0%
-Exports to outside the GCC
- International transportation - Supplies of certain sea, air and - land means of transportation
-Certain investment grade precious metals
- Newly constructed residential properties
- Supply of certain education
- services & health service
- supply of some financial services
- Residential properties
- Bare land; and
- Local passenger transport
Books of Accounts to be Kept
- Purchase Ledger
- Sales Ledger
- General Ledger
- VAT Ledger
- Annual Accounts
- Invoice Issued and Received
- Credit Notes and Debit Notes
- Records of Import and Export
Invoice must Contain
- Date of Issue
- Name and Address of Consigner
-Tax Registration Number
- (TRN) of Consigner Name and Address of Consignee
- Tax Registration Number
- (TRN) of Consignee Product, Quantity and Rate VAT Collected
Prepare to avoid Penalties
The Federal Tax Authority (FTA) has the right to issue penalties for non-compliance or for tax evasion. It will not be less than AED 500/- and not more than 3 times the amount of tax which the penalty was levied for administrative violation and up to 5 times for Tax evasion.
Few examples of administrative violation:
If fails to keep the required records accounts and other information
If fails to submit the data records and documents on time
If fails to submit a tax return or make a payment within the required period
If fails to submit a registration application on time
Few examples of instances of tax evasion:
- Where a person deliberately provides false or wrong information and data and incorrect documents to the FTA.
- Where a person deliberately conceals or destroys documents or other material that he is required to maintain.
The FTA can visit businesses to inspect records and make sure persons are paying or reclaiming the right amount of tax
At the beginning of 2018, the government of UAE will roll out the first-ever iteration of Value Added Tax in the country, which will be levied on a range of applications in order to stimulate the local economy. The Ministry of Finance specifies a Standard rate of 5% VAT to be implemented on transactions for various goods and services, as well as on the use of public infrastructure and services.
Dubai, as a part of the UAE, will be involved in developing a legislative framework for the tax, along with other countries in the Gulf Cooperation Council, (GCC) to ensure that the levy benefits and diversifies the local economy as planned. Make sure your business is prepared for the economic impact of the legislation, with the help of a professional VAT consultant in Dubai – partner with Chartered Tax Consultant today.
Due to the nascent nature of the legislation in this country, most businesses only have a vague idea about the requirements involved in VAT compliance, such as the proper documentation and filing procedures entailed in the compliance process.
Chartered Tax Consultant with a team of professionally Certified Accountants and customer service representative to take yours business challenges who can help your business structure in-house recording and filing processes to ensure that your company does not incur any penalties from improper compliance. We will help you identify the potential financial challenges you might face in the implementation of VAT. We can also assign you a dedicated VAT consultant to update you on the latest developments regarding the legislation.