Value Added Tax (VAT) is an indirect tax. Occasionally, you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies goods and services that are bought or sold.
VAT will be another source of raising revenues for governments in the Gulf Cooperation Council. GCC countries have decided to implement taxation as part of governments’ efforts to diversity revenue in the context of sharp decline in oil prices. The International Monetary Fund has been recommending fiscal consolidation in GCC through diversification of government revenues and reduction of subsidies.
VAT is introduced in UAE from January 1, 2018. Federal Tax Authority shall be in charge if managing and collecting federal taxes and related fines, distributing tax-generated revenues and applying the tax- related procedures in force in the UAE.
Companies in the UAE that report annual revenues of over AED 375,000 will be obliged to be registered under the GCC VAT system. Companies whose revenues fall between AED 187,500 and AED 375,000 will have an option to register for VAT during the first phase of VAT implementation.
During the registration process various documents are requested to validate the information provided. The registration form should be completed by a person who is authorized signatory of the business.
Two or more persons carrying on a business are able to apply for a single group where, each person has a place of establishment or a fixed establishment in UAE, the persons are related parties and either one person control the others, or two or more person form a partnership and controls the others. In effect, entities within the VAT group are treated as one Entity for VAT purposes. Supplies made between members of the VAT group are disregarded for VAT purposes – no VAT is due on supplies.
VAT obligation – TAX return filing and payment
- Submission online.
- Deadline for submission and payment.
- The due date will be 28 days following the end of the return period.
- Late submission or payment can result in a penalty.
- Books of accounts and any information necessary to verify the entries.
- Additional records required for specific taxes, if different rate applies.
- Any other information as directed by FTA.
- Taxable persons for VAT must retain the books of accounts and records for at least 5 years
- Assistance in registration for VAT with FTA
- Accounting systems and record keeping under VAT (IT solutions/services)
- Assistance in filing VAT return
- System migration (IT solutions/services)
- Invoicing under VAT system (IT solutions/services)
- Training and awareness
- Assistance in tax agency services