VAT

The value is added to the product by the time of production and the cost of the value earned from the end customers and so is for the services as well.

The Saudi Cabinet announced that GCC nations agreed on unified “GCC UAVAT” where UAVAT stands for “the Unified Agreement for Value Added Tax”. It is initially a framework agreement that will be gradually concluded by all six GCC nations. The rate of VAT has been confirmed at 5 per cent, a figure that was agreed at GCC level in mid-2016.

The purpose served by single entity “GCC UAVAT” is just to bring Vat law in effect in very coordinated manner in all six nations without any condition to resemblance of VAT laws of nations or time to enforce the national VAT law and it will be in effect before the predefined deadline i.e. January 1st of the year 2019.

UAE is to enforce the VAT as national law on 1st January 2018. His Excellency Obaid Humaid Al Tayer the UAE Minister of State for Financial Affairs, has stated that the UAE will implement VAT at the rate of 5%. The government is expecting VAT implementation as long-standing plans for economical expansion away from oil, disturbig social and economic programmes. The exact details of the VAT regime which will need to be set out in the common framework and national legislation are yet to be made available.

The UAE’s economy is the most closely integrated of all the Arab economies into the global economic system and efforts are continuing to enhance the country’s business friendly environment, both to facilitate trade and attract inflows of foreign direct investment, which will help to achieve balanced, sustainable development. This process continues through the signature of many bilateral and multilateral cooperation agreements. Locally, these efforts have embraced reforms and updating of legislation, including a new Competition Law, which came into effect in 2014.

What is VAT?

It is the tax borne by the consumer of both goods or services and could be defined as multi point sales tax of which the payment is fixed to be done by the time of purchases.

VAT at a glance

  • It is the tax almost added to everything you buy including goods or services.
  • The businesses collect VAT from you and return it to government by paying VAT on what they purchase.
  • The VAT is a tax payable only on value added to commodities and on the services rendered.
  • VAT covers at all three levels manufacturing, wholesaling and retailing.

Common VAT Agreement of the States of the Gulf Cooperation Council (GCC)

Pursuant to the objectives set out in the Statute of the Gulf Cooperation Council aimed at the importance of developing existing cooperation relations amongst them in various fields;

In line with the objectives of the GCC Economic Agreement of 2001, which seeks to reach advanced stages of economic integration, and develop similar economic and financial legislation and legal foundations amongst member states , and with a desire to promote the GCC economy and proceed with the measures that have been taken to establish economic unity amongst Member States; and

Pursuant to the Supreme Council decision at its 36th meeting (Riyadh – 9-10 December, 2015) with respect to the common imposition by the GCC States of VAT at a rate of 5%, and delegating to the Financial and Economic Cooperation Committee the completion of all the requirements necessary to pass the (Common VAT Agreement of the states of the Gulf Cooperation Council) and signing it. And whereas this Agreement aims to establish a common legal framework for the introduction of a general tax on consumption in the GCC known as (VAT) levied on the import and supply of Goods and Services at each stage of production and distribution.

VAT Registration

Businesses with an annual turnover of more than AED 375,000 should apply for registration on or before December 4, 2017, the UAE Federal Tax Authority said.

Deadlines Oct 31, 2017 is a deadline for businesses with Annual turnover of Dh150 million. Nov 30, 2017 is a deadline for businesses with Annual turnover of Dh10 million but less than Dh150 million. Dec 04, 2017 is a deadline for businesses with Annual turnover of more than Dh375,000 million.

With the announcement of the introduction of VAT in UAE from 1st January 2018, it is mandatory for the businesses to register themselves as per the criteria specified in the new tax regime. All the individuals or the firms engaged in businesses activity have to comply with the rule laid down by the Federal Tax Authority. For example, Registration will be necessary for all the firms that fall under the threshold annual turnover of AED 375,000 and more than 3.5 lakh of businesses are expected to register under this new regime. The businesses that have not registered for VAT will neither be able to charge VAT on their sale nor will be able to claim Input VAT paid on their purchases. Moreover, a business can get itself registered, regardless of the fact that they meet the threshold annual turnover criteria or not, i.e. there is an option of voluntary registration too, for the businesses that don't fulfill the minimum annual income criteria but are above the base of AED 187,500. The registration criteria have been described below in more explanatory form.

VAT Implementation

A thorough study and analysis of the business model is required for the effective implementation of VAT within the organization. Full understanding of the business model renders clear insight about the organization; hence it is a perquisite to identify specific rules and customer base, associated with one’s business.

VAT Return Filing

VAT return is a record or statement of the VAT paid on taxable supply of goods and services during a specified period. Usually, VAT returns are filled quarterly and sometimes on a monthly basis. As per the Federal law no. (7) of 2017 on Tax procedures, a taxable person needs to submit VAT returns in UAE with the information and data specified for Tax purpose in accordance with the form, specified by the Federal Tax Authority.

VAT Advisory

Our team of professionals explore all the possible options available within the legal framework of the law before providing final advise, since the requirement differs from business to business. It is necessary for every business organization to plan for VAT starting from the contract stage of the transactions so that necessary clauses can be included in the contract so as to minimize the VAT impact, failure of which may lead to reduction of profit margins. We support your business through our pragmatic and edge cutting VAT advisory service that lets your business grow and become compliant of every rules laid down by the legislation of tax authority. Our planned road-map for VAT related services (transaction related advice) will let you concentrate on the core activities of your business. Our experienced professionals will lead you to the stairway of success by unburdening you from VAT related issues and will let you concentrate solely on core work.

VAT Compliance

Every business entity is required to be VAT compliant in order to avoid levy of heavy penalties. There are very strict provisions for non-compliance for deliberate tax avoidance, incomplete and incorrect filings by any taxable person. For being VAT compliant every business entity must obtain the VAT registration, maintain proper books and file timely returns. Theory of VAT is very simple however its application can be complex. VAT is the core competency area of the United VAT. Our team of professionals will help you in fulfilling following compliance requirements at reasonable prices

VAT Amendment

Our multinational team of VAT training specialists possesses profound knowledge and understanding of local and international tax environments. Backed by extensive industry experience, we provide targeted solutions for various businesses in line with their objectives, requirements, and challenges.

Tax Agent Service

It is a proven fact, that efficiency of the company is greater when internal processes are streamlined, all the inputs work and concentrateon the core activities of the business, rather than indulging in non-core activities related to the business. It is also very hectic and time consuming for the companies to manage tax related issues with the concerned authority i.e. FTA, in-house. Therefore, it is an essential need for the companies to appoint subject matter expert to handle such tax related matters. And it will only result in gain for the company; few benefits of tax agent have been listed below.

VAT Impact on Automobile Industry

In present time, the automobile industry in UAE has been suffering from issues due to excess stock of vehicles and the schedule inclusion of VAT has resulted into a grave concern for industry players in the region. Stakeholders think that the final legislative framework of VAT agreement could provide some explanations for the operational objectives, for imported and local vehicles.

VAT Impact on Hospitality Sector

The ‘Gulf Cooperation Council’ (GCC) states are setting themselves up ahead for the introduction of ‘Value Added Tax’ (VAT) as earliest as upcoming New Year i.e. with effect from 1st January 2018. According to PTI Sources, it has been revealed that the standard rate of 5% in Hospitality segment will be imposed.

VAT Impact on Household Budget

UAE is known to the world for its tax-free living mechanism for household but the golden days are set to get over by the start of next year. The reason is the introduction of VAT (Value Added Tax) which is slated to be launched from 1st Jan, 2018. The standard VAT rate would be 5% in the six countries of the Gulf Corporation Council (GCC), including the UAE.

VAT Impact on UAE Insurance Sector

VAT is good to be initiated in the Gulf Cooperation Council (GCC) regions, the framework, rules and regulations are already endorsed by the member nations, VAT is probably going to significantly affect the financial administration, especially Insurance sector related organization. In outcome of its foreseen presentation, among different business segments, Life Insurance as well as General Insurance might feel the heat of implication of VAT in the framework as these organizations are relied upon to feel the inflationary weight,while it is presumed that Life Insurance would be exempt but vagueness still holds tight on General Life Insurance business.

VAT Impact on UAE Real Estate Sector

Real Estate sector is one of the most imperative segment for any nation so it is for UAE ,the government of UAE is endeavoring to give their best treatment and care while executing the VAT in UAE, In a few Purviews, the first sale of the residential properties is generally excluded or it is kept ‘zero rated’.

Vat Impact on Restaurants

Value Added Tax (VAT) is actually a consumption tax that is levied on the supply of goods and services. It is to note that restaurants are also included under this tax regime.

According to latest reports, VAT is expected to hit the UAE market on 1st January, 2018 and restaurants are likely to pay 5 % VAT. It is also true that there are both big and small restaurants and cafeterias operate in the UAE region and many of them might not upkeep proper accounting records. However, the VAT in the UAE will be applicable even for SMEs with annual turnover of AED 375,000/. As per experts, words, restaurants and cafeterias making a daily sale of AED 1,000/- on an average will be covered under the VAT range. In other words, almost all the restaurants and cafeterias operating in the UAE have to register for VAT.