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Value Added Tax (VAT)

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Value Added Tax (VAT), an indirect tax levied on consumption of goods and services has been adopted as a system by almost 160 countries globally. This tax serves as another segment for revenue generation for the Government of UAE. If you are a business owner or looking to establish your business in UAE, there are legal compliance matters relating to VAT Law that you should follow to avoid penalties.

All businesses with annual revenue of Dh 375,000 or more are required to submit their VAT registration online applications within 30 days of being required to be registering.

Types of VAT Registration
A) Mandatory Registration
The mandatory registration limit is AED375,000. Businesses are required to register if they satisfy the following:

  • For over the 12-month period, the taxable supplies of the business are higher than the mandatory registration threshold, or
  • The business expects to make taxable supplies in the next 30 days that will take the taxable turnover beyond the mandatory registration threshold.

B) Voluntary Registration
The amount for the voluntary registration threshold is AED 187,500. Businesses that do not meet the mandatory registration criteria but fall in the following category may opt for a voluntary registration:

  • In the previous 12-month period, their taxable supplies or taxable expenditures are worth more than the voluntary registration threshold, or
  • The business expects for their taxable supplies or taxable expenditure for the next 30 days to be worth more than the voluntary registration threshold

Penalty for Non-Registration under VAT
Any company that misses the VAT Registration cutoff date or fails to complete the VAT registration process under the deadline set by the Federal Tax Authority will be levied a fine of AED 20,000.

VAT Group Registration
VAT Group Registration is a tax registration process where two or more business parties join together to form a group, with the intention of having one registration number and paying single tax. A VAT group allows people and entities that are closely linked financially, economically and organizationally to operate as a single VAT person. Group registration allows the companies within the Group to invoice each other without VAT.

VAT has been introduced in UAE effective 1st January 2018. There are various framework, laws and regulations issued at GCC and UAE level. As this is a new tax introduced, there have been various clarifications issued since VAT was implemented in UAE. The list of current legislation is as below:

As a business owner you are require to comply with the laws. Experienced Tax Consultants can assure peace of mind to the owners. IFC team comprises of UK qualified Chartered Accountants where they have extensive experience of dealing with VAT. Our team of VAT experts at IFC are constantly updating themselves with the new clarifications issued by Federal Tax Authority and work closely with our clients to ensure compliance.

GCC countries have signed an agreement known as the Unified VAT Agreement and UAE is one of the member state as a party in that Agreement. VAT was mutually agreed to be introduced in GCC to dilute the dependency of the entire country on oil and other hydrocarbon products.

Various laws at GCC and Country level were passed resulting the VAT accounting.

UAE VAT
There are 3 kinds of VAT rate in the UAE
  1. Standard Rate
    Most of the goods and services have been taxed at the standard rate of 5%. These include electronic items, automobiles, fuel, jewellery, food & beverage, apparels, entertainment services, cosmetics, restaurants & hotels, commercial leasing, construction, etc. However, since the introduction of the VAT, several clarifications and Industry specific laws have been passed.
  2. Zero Rate
    For certain categories of goods and services, VAT is charged at zero rate, i.e., such items are taxable but with a zero rate. Items taxed at zero percent include export of goods or services, international transportation of goods and passengers, supply of certain means of transport, supply or import of investment precious metals (of 99% purity or more), residential buildings, buildings used by charities, certain education services, and certain healthcare services.
  3. Exempt
    VAT is not applicable for goods and services falling under this category. It includes financial services, certain residential buildings, bare land, and local passenger transportation.
Essential Documents for VAT Accounting

Any business needs to submit a set of documents in order to initiate the process of VAT Accounting. The set of essential documents includes:

  • Record of all supplies and imports of goods
  • Tax credit notes and alternative documents
  • All tax invoices
  • Reports of goods exported
  • Taxable supplies received or made
  • Due on tax supplies
  • Recoverable tax supplies or imports
  • Apart from these, the Federal Tax Authority (FTA) can also ask for certain details like Annual Account details, General Ledgers, VAT Ledgers, Purchase daybooks, Invoices issues, Credit and Debit notes, etc.

    Penalty for Not Keeping Proper Records

    Failure by person or business to keep a track of proper records would result in a penalty of AED 10,000. If the offense is repeated again, a sum of AED 50,000 maybe imposed.

VAT Implementation is critical for any organisation that is required to register for VAT. Implementation of VAT is not just about knowing the rules and then applying to the accounting system.

Our aim is to thoroughly understand your operations, business processes and contractual obligations.  Thereafter, we provide a complete solution which incorporates the following five (5) key areas that impact the business due to VAT:

  • Compliance – Compliance with the aspects of law relating to the activities carried on by the business
  • Supply Chain – VAT is tax on the value added as the goods change ownership in the supply chain.
  • Accounting and Reporting
  • Technology Refresh
  • Change Management and Training

The name for VAT Return Form is ‘VAT 201’.  This has been divided into different sections:

  • Taxable Person Details
  • VAT Return Period
  • VAT on sales and all other outputs
  • VAT on expenses and all other outputs
  • Net VAT Due
  • Additional reporting requirements
  • Declaration and Authorized Signatory

In order to access VAT 201, one needs to log in FTA E-services using their username and password. The non-filing or incorrect filing could in paying penalties ranging from AED 1,000 to AED3,000.

If you are an entrepreneur and planning to start your business in UAE you are mandated to keep proper book of accounts and register for VAT. At IFC, we can help you file VAT Returns correctly.

VAT was introduced in UAE effective 1st January 2018. The initial legislation issued included the following:

The internal accounts team of many organisations had initial training or advisory from external consultants or by attending the government conducted seminars but there have been many clarifications issued since the launch.

IFC VAT team is fully up to date with laws and clarifications. We provide mock FTA Audit service to the clients who would like to ensure that they are compliant and their internal team is processing the data and keeping records as required by the law.

VAT training is beneficial for any company, as it keeps you and your responsible staff updated about VAT in a user friendly way. VAT is still a relatively new concept in the UAE. With this training, the accounting staff of companies will gain full understanding of VAT, how to interpret the Law and how to stay compliant.

We cover the following:

  • Legislation at GCC and UAE level
  • Impact of Legislation
  • Steps to keeping compliant with VAT Law
  • Mandatory requirement under the law and options available
  • VAT Accounting records required for compliance
  • VAT Return preparation and filing
  • Penalties
  • Appeals Process

Our VAT training in Dubai has been designed for people who are new to VAT or would like to refresh their knowledge on VAT. This is for people who make big decisions for their companies that have consequences, which involve VAT.

Who Should Attend the VAT Training in Dubai?
Since it is essential for a company to work as one, we advise for your company to bring the following staff:

CFO & CEO
Chief Accountants
Treasurer and Cashiers
Tax Preparers
Controllers
Procurement Managers
Cost and Budgeting Managers
Senior Accountants
Accounting Managers
Tax Consultants
Staff Accountants
Internal Auditors
Other Accounting and Finance Staff

Our Approach to Value Added Tax

IFC invests in training staff to ensure they are fully up to date with the new VAT and tax laws.
IFC staff are experienced consultants from various tax jurisdictions and can guide you through the tax legislation in UAE.
We support clients by understanding their needs and the nature of their businesses.
IFC believes in transparency with rates and processes. After mandated by clients, IFC assigns a VAT expert who ensures timely deliveries and keeps them updated throughout the progression of service.

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