VAT stands for Value Added Tax, and this actually made its debut in the GCC block, consisting of six nations, in the year 2018. The fact is that, although a lot of people have a basic idea about what it means, there are still a lot of aspects about it that are not clear. So, here’s throwing some light on some of the important features of VAT in UAE that you need to know.
So, What Exactly is VAT in UAE?
The VAT is considered as one of the significant sources of revenue for the governments under GCC (Gulf Cooperation Council). The six nations have reached the decision to implement the tax as a part of their efforts towards diversifying the revenues due to the steady decline in the oil prices. The KSA VAT Law is also there to charge on the registration.
This has been the specific recommendation by the International Monetary Fund to consolidate finances by diversifying government revenues and reducing subsidies. Since the year 2018, five percent of VAT has been levied in UAE.
A brief about VAT Implementation Riyadh
VAT is nowadays expected to be introduced around the UAE on 1st January, 2018. The Kingdom of Saudi Arabia and UAE will be the very first 2 member countries of GCC to implement VAT. Some of the other member countries such as Bahrain, Oman, Qatar and Kuwait are expected to implement VAT in the middle of 2018 or beginning of 2019.
There is a basic and standard rate of 5% will be levied on the supply of services and goods in UAE. Though, there are certain supplies like local passenger transportation, specified financial services, healthcare, exports outside GCC and so on, which will be either zero-rated or exempted from VAT in UAE.
Only when ‘Executive Regulations’ for Value Added Tax Saudi Arabia have been released, clarity on a few situations and conditions and controls for exempting the supplies mentioned in UAE VAT law will be accessible.
First of which is about only ensuring that all the financial transactions have been simply recorded and books of accounts are quite perfect and accurate and also up to date. This is because, the books of accounts will surely act as the evidence for minimum annual turnover threshold limit for the registration and on this basis, either you will be properly mandated to register or you will be able to request for exemption from registration.
Secondly, being ‘VAT Ready’ means, you will have to charge VAT on supply of the taxable services and goods, account the VAT paid on the acquisitions such that Input tax deduction can be claimed and finally, you have to file online VAT returns on a regular basis, disclosing the details of VAT charged and paid.