Value-added tax on more commonly known as VAT has been put into force in the UAE. The law charges several people under it, yet it is a concept most people have not grasped. It has not been much time since its implication by the GCC. It is time to be acquainted with the basics of the new VAT implementation in UAE.
- When was it implemented in UAE?
The VAT system was implemented from 1st January 2018, and the registration for the same has to be done from that date itself.
- Why is VAT being implemented in UAE?
It is an extra payment to the government which adds to its inflow of revenue. These amounts are used to provide service and facilities to the public like hospitals, parks and roads. It will also help the government in building a knowledge-based economy in the future and reduce its dependence on oil.
- What is the rate of VAT and which sectors is it applicable to?
VAT implementation is done in the UAE by fixing it at a rate of 5% to be levied on the supply of all goods and services. Discovers all sectors except the ones which have been recently expressed to have a zero rate or VAT exception.
The rate of what applies to some goods and services is zero. This includes the initial supply of residential buildings, services provided for health and education, the international transport facilities supplied for passengers and goods and exports.
- What is exempt from VAT in UAE?
There are some services like transportation facilities provided in the local area, residential building supply, bare land and some specified financial services.
- What is the income limit for mandatory and voluntary registration to VAT?
A business has to mandatory register for VAT if the taxable stocks and imports surpass the compulsory registration limit of Dhs375,000. A company also has the right to choose to register for VAT voluntarily if its stocks and imports are valued lower than the compulsory registration limit but more than the voluntary registration limit of Dhs187,500. A business can register voluntarily if the expenses incurred exceed the optional registration limit.
- How should one register for VAT?
The website if the Federal Tax Authority is available for registration to VAT. One can browse for it on the internet at any time of the day as it is available 24 hours a day and all the seven days of the week.
- What are the specified date for registration to VAT?
VAT implementation in UAE was done on 1st January 2018, and that is when the registration had to be done. There could not VAT charge ability before that date because the record had to be done by that date itself.
- Can professionals be consulted for VAT registration and application for a business?
VAT experts can be consulted to find out the grouping or the VAT implementation plan that is likely to suit the business the most.
- When should the tax returns be prepared?
Each taxable party has to prepare the tax for each session during registration, and the same has to be handed over to the authorities. Any payment to be made has to be cleared within the period specified by the law. The authorities can lawfully reject incomplete documents.