UAE - Value Added Tax (VAT)
The GCC countries have developed a unified legal framework for the introduction of a general tax on consumption in the GCC known as VAT (Value Added tax). The GCC views this tax as an alternate source of income and to generate revenue for spending on public welfare.
Two of the GCC countries, UAE and Saudi Arabia have announced that they will implement VAT from 01 January 2018. Other GCC members are expected to follow within another year.
While we wait for the regulations to be released by the UAE the law has been released and provides sufficient detail to enable businesses to get ready and be compliant as on 01 January 2018.
The VAT Law released contains stringent and high penalties for non-compliance make it essential that business ensure they are in a state of readiness. The short duration available prior to January 2018 makes it essential that adequate steps are taken timely.
For more info and details please call or send a mail to tax@accvat.com
Value Added Tax (VAT) - FAQs
- Working Capital requirements will increase and free Cash Flow will be adversely impacted due to the timing difference in paying the VAT upfront and collecting the funds at a later date.
- Proper books and records need to be maintained by each business for a minimum period of 5 years (15 years for real estate companies).
- VAT is a self-assessment tax and each business is a acting like a tax collector on behalf of the Tax Dept., so there is a high likelihood that there will be inspections and audits that might take place.
- The impact of VAT is not restricted to accounts only and spreads across the business, so it is imperative that each business carries out an impact study timely to ensure that each staff is aware and there ERP is ready for proper input and output tax and reconciliations for submission. The implications would impact Sales, Procurement, HR, Legal, IT and Finance/Accounts.
For more info and details please call or send a mail to tax@accvat.com
A business must register if:
- The total value of its taxable supplies made within the UAE, exceeds the mandatory registration threshold of AED 375,000 over the previous 12 months period, or;
- It anticipated making taxable supplies with the value exceeding the mandatory registration threshold of AED 375,000 in the next 30 days.
- If businesses have taxable supplies over AED 187,500 but below the above threshold then they are encouraged to register voluntarily. If the expenses subject to VAT exceed AED 187,500 it is recommended that one registers.
- Entities with taxable supplies below AED 187,500 need not register.
Registration is now open and the deadlines are as follows:
- All businesses with a turnover exceeding AED 150M should apply for registration prior to 31 October 2017.
- All businesses with a turnover exceeding AED 10M should apply for registration prior to 30 November 2017.
- All other businesses that must be registered by 01 January 2018 should apply for registration by 04 December 2017.
For more info and details please call or send a mail to tax@accvat.com
- Each business should timely have an internal awareness session to ensure that all employees are aware of VAT and have a basic understanding.
- Engage a professional to carry out an impact study for their business
- Develop a proper plan to ensure that the systems are ready and the compliance steps are carried out timely
- Execution phase where the system and outputs for filing are tested to ensure correctness of data and be “VAT ready”.
For more info and details please call or send a mail to tax@accvat.com
- Failure to identify the impact of VAT on a business can upset the cash cycle
- Failure to consider increase in costs due to VAT might erode profit margins
- Incorrect computation and under payment of VAT
- Non-compliance may result in penalties
- Any action by the Tax authorities could damage the reputation of the business
- Adversely impact commercial relationships
For more info and details please call or send a mail to tax@accvat.com