cllbak

VAT Implementation

Home / VAT Implementation

Value Added Tax (VAT)

Value Added Tax (VAT) was introduced in the UAE on 1st January, 2018 with a rate of 5%. The VAT is an Indirect tax imposed on the supply of majority goods and services, like automobiles, fuel, jewellery, food & beverage, Hotels & motels, restaurants, entertainment, Insurance etc. are charged at this rate. Health, education, transport by air, land or sea, etc. are classified as Zero-rated. Whereas; local passenger transport and bare land are exempt from VAT. Businesses require taking certain steps for VAT implementation into their operations. The implications of UAE VAT can be huge for you and your business. We at AKGVG Accounting and Bookkeeping can provide assistance to businesses implementing VAT in UAE.

office-img

Steps involved in the application of VAT Services:

Businesses can be in ambiguity as VAT is a new concept for the UAE. We can assist businesses by providing a complete walk through for VAT implementation. Our VAT experts can systematically assist you in following manner:

  • Our VAT expert visits your office to understand the business model for designing VAT implementation plan which suits for the UAE VAT Regulations for your business.
  • Our expert will advise regarding the procedural formalities and deadlines by which registration has to be made, considering exemptions and other factors.
  • We assist management in hassle free VAT implementation by accessing the impact on business on working capital, costing and profitability.
    Accounting systems under VAT:
  • A thorough study of present accounting systems will be done. Appropriate classification/ grouping with suitable chart of accounts in consonance with VAT regime will be recommended. Needed recommendations will be given to the accounts team for preparing the first VAT return to the Federal Tax Authority (FTA).
  • Invoicing under VAT:
  • The VAT invoicing criteria set out in the UAE VAT law will be applied. We will provide appropriate guidance to Accounting and other sales-related departments.
  • Filing a VAT return:
  • Supporting the preparation and filing of the first VAT return by taking the correct input tax credit against total VAT liability with guidance on planning/ better cash flow timing.

An illustrative list of documents required for VAT registration in Dubai:-

  • Business Trade License or Commercial License copies
  • Passport copies of the owner or partners of the company mentioned on the license
  • Emirates ID of the owners/partners of companies (as per the business license)
  • Memorandum of Association (MOA)/ Partnership Agreements
  • Certificate of Incorporation
  • Complete Company Address with email id, number, and other contact details.
  • Company Bank details including IBAN
  • Details other commercial entities of the owners/partners (if any)
  • The income statement for the last 12 months (Signed & Stamped by the owner or the manager)
  • Amount of the expected revenue and expenses for next 30 days after VAT implementation.
  • To specify if any kind of export or import activities carried by the company (if any)
  • Provide the custom code along with the copy of Dubai Custom Code Certificate (if Any)
  • Indicate names of all GCC countries the company has business relations
  • Specify if your company would like to be registered as a tax group number for all the entities or separate tax numbers for each.
  • Provide a detailed description of the experience of business for the last 5 years.

Why AKGVG Accounting and Bookkeeping?

AKGVG Accounting and Bookkeeping do everything you would expect from accountants and tax advisors, but there is more to us. We provide a wide range of personalized tax and accounting services. So, whether you’re a well-established company or just starting out, we are here to help you and direct you through the step-by-step cycle of business and financial needs for your business. We ensure that you have all the information you need and help you prepare to optimize your business performance. To begin your steps towards filing VAT, please contact us- we would be happy to assist you.

about

VAT FAQs:

A Value-Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.

VAT will provide the country with a new source of income, which will ensure the continued provision of high-quality public services in the future. It will also help the government achieve its vision of reducing dependence on oil and building a sustainable knowledge economy for the future.

Output VAT is the value added tax that you calculate and charge on your own sales of goods and services if you are registered for VAT. Output VAT must be charged on sales both to other businesses and to ordinary consumers. Input VAT is the value added tax added to the price you pay for eligible goods or services. If you are registered for VAT, you can deduct the amount of VAT paid from your settlement with the tax authorities.

VAT registered businesses charge and add VAT to the value of goods and services they supply. They can also reclaim VAT incurred on goods and services. Please refer to the illustration for an easy-to-understand example.

  Sales Calculation VAT Total
Coffee Beans Manufacturer 10.50 AED 0.50 AED 0 0.50 AED
Beans Distributor 15.00 AED 0.75 AED 0.5 AED 0.25 AED
Coffee Shop 20.00 AED 1.00 AED 0.75 AED 0.25 AED
Total VAT paid by end consumer       1.00 AED

*VAT is collected through the supply chain, and the end consumer pays and bears the VAT cost.

Mandatory registration threshold limit of AED 375,000.

Voluntary registration threshold limit of AED 187,500.

Due date to file VAT return is 28th of following month, when quarter ends.

Every Customer, have to pay UAE VAT if they are consuming the VAT applicable goods or services.

Export of goods and services outside the GCC and international transportation are Zero-rated.

Imports are taxable under VAT. The importer has to pay VAT on imports on reverse charge basis. This is in addition to customs duty levied on imports.

The registered entities who are eligible to get VAT refund (When input VAT is more than output VAT) can submit the VAT returns to the authority by disclosing the same.

Some following categories of supplies that will be exempt from VAT are:

  • The Supply of certain financial services
  • Sale of bare land
  • Lease or sale of residential property
  • Local transport