The implementation of Value Added Tax is a fairly new addition to the roster of taxes that were levied on a business. The main intention of its implementation was to ease the process of setting up and running a business in the United Arab Emirates and also to generate a new source of income for the government which can be used for the betterment and development of the people of the country.
VAT has been considered as a mandated consumption tax on all the goods and services of the country. At present, almost 160 countries have applied this concept in their country law and the increasing rate of VAT acceptance has resulted in a higher number of VAT Consultancies all across the globe. If your business hasn’t been registered for VAT services, this is the first crucial job that needs to get done.
To know the reason behind the urgency, do continue reading.
VAT in UAE
Every business in the country should know how to prepare VAT returns in the UAE and also claim for VAT returns after vat returns filing in Abu Dhabi and the rest of the Emirates. Realizing this, most of the GCC countries have recently entered into an agreement for implementing VAT in the country. Till now the GCC countries such as Saudi Arabia, the UAE, Bahrain and Oman have implemented VAT. Being registered under the VAT law defines that your business is recognized by the government.
Dubai is considered the heart of the business centre at a global level. The whole country has gone through several changes in the taxation system in the year 2018. The United Arab Emirates is known as a business centre because it offers its various offerings such as multiple trade-free zones, easy to navigate the business environment, incentives of businesses in the country etc. VAT in Dubai was a turning point for the taxation system in Dubai.
VAT rate in Dubai, UAE is 5% applicable to most of the goods, services & businesses.
In order to ease the VAT process, certain categorization has been made for the payment of VAT for the companies in the United Arab Emirates. Let’s have a glance at it.
Slabs for VAT Registration in UAE
Businesses having taxable supplies and imports above AED 375,000
Mandated to apply for VAT registration
Businesses having taxable supplies and imports between AED 187,500 and 375,000
Can voluntarily apply for VAT registration
Businesses having taxable supplies and imports less than AED 187,500
Not required to apply for VAT registration
Business Impact of VAT in Dubai, UAE
Since VAT is an additional charge that needs to be paid, it has certain impacts on the business front. Let’s have a look where it impacts the most:
The changes or implementation of VAT will be having an effect on company structure, dealing with customers and suppliers will turn out to be crucial. This will in turn affect the profitability of the business and will also affect the economy of the country.
On the financial front, the company will definitely be impacted since it would deal with the cash flow and proper allocation of cash to minimize the cash outflow. If the proper attention to the VAT services is not given then the company may bear huge losses in the future.
Business processes and functions are to be made VAT-ready before the implementation takes place. This will help reduce the number of errors and mistakes in the VAT filing and also VAT return filing in Abu Dhabi and various other jurisdictions.
Business relations are impacted by both the suppliers’ and customers’ sides. It is necessary that both parties follow the rules as laid down by the concerned authority so that there is no problem to be faced in the future.
Thus, we can see the various impacts that VAT have on the different segments of a business entity. Now, it becomes extremely important to manage the VAT books in a proper way so as to avoid any mishaps in the future. At this crucial point, a VAT consultant is what you need. A VAT consultant would help you deal with the best possible way to prepare the VAT structure that eases out the entire VAT filing process.
VAT Record Keeping
Maintaining VAT records is done so that it is easier for the management as well as the government to track up-to-date information regarding VAT filing and to avoid unnecessary tax payments. Any company registered under VAT Law shall maintain its book of records for a minimum period of the last 5 years. The core essentials of this book include:
- Sales and purchase invoice
- Debit and credit notes
- Import and export notes
- Accounting books
- Zero-rated supplies and purchase
- Goods issued for private use
What is a Tax Registration Number (TRN) and How to obtain it in Dubai or in the Rest of the UAE?
Tax Registration Number, or TRN, is a 15-digit number allotted to business entities that complete the application process and register under the VAT law. It can be regarded as the identification number for the registration of VAT with the Federal Tax Authority (FTA).
A business entity in Dubai or the rest of UAE has to go through the VAT registration process in the e-portal launched by FTA (www.tax.gov.ae). In order to obtain the TRN, the company has to submit the application along with the copy of essential documents like trade license, share certificates, MOA and AOA, Power of Attorney (if any), passport and Emirates ID of the shareholders and managers, customs registration documents, financial information such as revenue/turnover break-up for last 12 months, etc.
Are you confused about choosing the best VAT consultancy in Dubai? Well, the answer to your query lies in the next step.
JAXA VAT Consultancy Services in Dubai, UAE
At JAXA, we understand the business complexities ranging from accounting, taxation and VAT services. The experts at AXA will understand the working or the business and will provide a customized solution to the business accordingly.
We provide the best VAT consultancy services in Dubai, which include:
- VAT compliance and control
- Filing and payment
- Data recording and management
- Supplier management
- Customer management
JAXA is a platform that has been dealing in providing accounting services and taxation services to start-ups and established businesses at a global level. We have a large number of satisfied clients at a global reach ranging from small and medium to multi-national businesses. We have been providing one of the best VAT consultancy services in UAE.
If you are looking for a VAT consultant, you can count on us. To initiate your steps towards VAT filing, do contact us – we’d be glad to assist you.
Is there any separate treatment of VAT for free zone companies?
The FTA has issued a list of Designated Zones in the UAE, and only the free zones that are announced as Designated Zones shall follow special provisions, as published by the FTA. A Designated Zone has special treatment for the supply of goods, for instance, the supply of goods within a Designated Zone shall be treated as out of scope - with no VAT applicable. But services supplied by Designated Zone companies are in the same line as for Mainland Companies and shall follow the same rules as applicable for a Mainland Company, i.e., normally taxed at 5% unless exempt or zero-rated.
What is the deadline for VAT return filing and payment? Are the dates for payment and return different?
The deadlines for VAT return filing and payment are specified in the TRN Certificate, and these are either monthly or quarterly based. The due date for submission of VAT return and payment of due tax is the 28th day after the tax period closing (monthly or quarterly).
Does one need to keep mandatory books of account for VAT?
Yes, a registrant has to keep relevant books of accounts and records, as specified by the VAT Law. And these should be kept for a period ranging from 5-15 years.
What do you mean by the recipient of goods?
Recipient of goods refers to a person or business entity to whom goods are supplied or who imports.
What is tax evasion?
Tax evasion is an illegal practice of lowering the amount of tax due to the federal authority so that the business entity has to pay fewer taxes to the FTA.
What is recoverable tax?
It states that the tax amount that has been paid by a taxpayer can be repaid by the authority to the provisions of the decree law.
What is the tax credit note?
A tax-credit note is a document that is issued by a supplier to its customers stating a deduction on the original price in respect of the goods or services supplied.