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5 Things You Should Know About VAT Implementing in UAE

Value Added Tax (VAT) is an indirect tax that is levied on the supply of various goods and services.

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5 Things You Should Know About VAT Implementing in UAE

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  1. 5 Things You Should Know About VAT Implementing in UAE How it works? Value Added Tax (VAT) is an indirect tax that is levied on supply of various goods and services. VAT was implemented Saudi Arabia and UAE from 1st January 2018. VAT is a multi-stage tax that is charged at every stage of the supply chain, but the credit of input tax is refundable. It is the consumers that bear the VAT costs, the businesses on the other hand collect and account for the tax. Businesses then pay government the tax that has been collected from the consumers. Businesses in some cases may also reclaim from the government the VAT they had paid to the suppliers. The government thus receives tax on that ‘value added’ in the entire stages of the supply chain. Why UAE introduced VAT? Fuel industry generates maximum revenue for the UAE government. Ever since the fuel prices started degrading, the government was compelled to opt for alternate revenue sources so that public continues receiving the high-quality services. Apart from some specific products/ services, VAT is applicable on almost all minor and major industry that includes business, hotel, transport, education, electronics, school uniforms, jewelry, commercial rents, food and more. In short, VAT will be applicable to most of the goods and services residents consume on daily basis. The UAE implemented 5 per cent VAT, exempting few goods and services at zero-rated as a part of the GCC- wide agreement. VAT implementation will enable the government of UAE to boost its coffers so as to better the infrastructure and offer good facilities. Here’s everything you should know about VAT implementation in UAE:

  2. 1. Tax records to be retained by businesses The following records are to be maintained and retained by all the registered and unregistered businesses in the UAE- Revenues Expenses Purchases Sales Receipts Payments Accounting records Payroll Profit and loss Inventory and stock levels Record pertaining to fixed assets Balance sheet 2. Filing VAT Return- Form VAT 201 VAT return filing service UAE is done through online portal of FTA. The VAT Return Form can be accessed by login into the e-services of the FTA portal, using the respective username and password. The Tax Expert can help you fill the VAT return form, with the help of all relevant information. This has to be done within the due date prescribed by the authority. 3. Information to be provided in the VAT Return The total output tax payable and the input credit available against such output must be disclosed separately. The content of the VAT Return Form are- Input Tax a.Tax on import services b.Tax on import of goods c.Tax on standard rated expenses d.Tax on standard rated purchases Output Tax a.Tax refunds provided to tourist b.Tax liability on import services c.Tax on imported goods on which tax liabilities are not created d.Tax liabilities on goods imported through customs. e.Tax liabilities under emirates wise Standard Rated Supplies (5%) Tax amount that has been disclosed above the Input Tax and under the Output Tax is the amount that has to be paid to the FTA within the due date for a particular tax period.

  3. 4. How to register for VAT and provisions of Tax groups in the VAT Businesses can register on the official website of the Federal Tax authority (FTA) which is available 24 x 7. The registration process is free of charge and takes only 15 to 20 minutes. Any representative of the business or a taxable person can apply for the VAT registration through the official website of the FTA. Those businesses related/ associated through a valid mean and have a business address in the UAE can apply for registration as a Tax group. With the help of tax grouping, the accounting and management requirements related to the VAT can be simplified. 5. Limits for mandatory VAT registration and voluntary VAT registration Business making imports and taxable supplies beyond the threshold of AED 375,000 must mandatorily register under VAT. The businesses can apply for voluntary registration under VAT whose imports and supplies are under AED 375,000 but above the voluntary registration limit of AED 187,500. This is applicable for those businesses whose expenses are above the voluntary registration limit.

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