VAT Implementation

/VAT Implementation

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.

Why there is VAT in UAE?

VAT will be another source of raising revenues for governments in the Gulf Cooperation Council (GCC).  It is estimated that UAE will generate more than Dh 12 billion additional revenue in the first year of implementation of this new tax.

GCC countries have decided to implement taxation as part of governments’ efforts to diversify revenues in the context of sharp decline in oil prices.  The International Monetary Fund has been recommending fiscal consolidation in GCC through diversification of government revenues and reduction of subsidies.

When will VAT be implemented in UAE?

VAT will be introduced in the UAE, along with other GULF countries, from January 1st 2018.

Authority

By virtue of this Federal Law by Decree, a public federal authority shall be established under the name of the Federal Tax Authority (FTA) under the Ministry of Finance. The headquarters of the authority shall be located in the city of Abu Dhabi. The authority shall be in charge of managing and collecting federal taxes and related fines, distributing tax-generated revenues and applying the tax-related procedures in force in the UAE.

How it works?

Companies in the UAE that report annual revenues (Sales Turn over) of over AED375, 000/- will be obliged to be registered under the GCC VAT system.  Companies whose revenues fall between AED187, 500/- and AED375, 000/- will have the option to register for VAT during the first phase of VAT implementation.

Registration for VAT

Companies fall under the above categories are subject to registration with VAT authorities and to complete the registration form.

VAT registration form will be available via the FTA’s online portal.

The deadline of the Registration for VAT has been given by FTA as follows:

  1. Companies having sales turnover of -150 Million and above has to be registered on or before 31st October 2017.
  2. Companies having sales turnover between AED 10 Million & AED150 Million and above has to be registered on or before 30th November 2017.
  3. All other who falls under the category of above AED375, 000 Sales Turnover has to be registered on or before 4th December 2017.

During the registration process various documents are requested to validate the information provided.

Supporting documents will include such items as:

  1. Documents identifying the authorized signatory, e.g. passport copy, Emirates ID,
  2. Trade License, and
  3. Other official documents authorizing the Entity to conduct activities within the UAE.

Following approval of the application a Tax Registration Number will be issued.

VAT GROUPS

Each member state may treat the Tax Group as a Single Taxable Person

Two or more persons carrying on a business are able to apply for a single “group” VAT registration where:

  • Each person has a place of establishment or a fixed establishment in the UAE,
  • The persons are “related parties” and
  • Either one person controls the others, or two or more persons form a partnership and controls the others.

In effect, entities within the VAT group are treated as one entity for VAT purposes.

Results:

  1. Supplies made between members of the VAT group are disregarded for VAT purposes (i.e. no VAT is due on supplies).
  2. Supplies made by the VAT group to an entity outside the VAT group are subject to normal VAT rules.

RECORD KEEPING

  1. Books of accounts and any information necessary to verify entries
  2. Additional records required for specific taxes, if different rate applies
  3. Any other information as directed by the FTA
  4. Taxable persons for VAT must retain the books of accounts and records for at least 5 years

OUR SERVICES

Our VAT services team shall assist you in:

  1. Registration for VAT
  2. Accounting Systems and record keeping under VAT (IT solutions/services)
  3. Filing of VAT return
  4. System migration (IT solutions/services)
  5. Invoicing system under VAT (IT solutions/services)
  6. Training and awareness

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Team Noor alwafaa provides accurate and up to date information with utmost transparency.

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