There are several important things to keep in mind as you prepare for the introduction of VAT in the UAE next year.
With the planned roll out of value-added (VAT) on January 1st, 2018, many companies in the UAE may be wondering how this new tax will be impacting their business. We compiled a list of some of the top things to keep in mind as companies begin to comply with the new system.
What is it and how does it work?
In a nutshell, VAT is a general consumption tax on goods and services that are sold in the country. It is a type of indirect tax that companies pass on to customers, which will later be collected by the government. VAT will provide the UAE with a new revenue stream that will be used to provide and improve public services, while it will also help diversify the country’s economy.
How much will be taxed and which business must apply the tax?
VAT will be introduced at a rate of 5%, which will be implemented by companies in the UAE that earn revenue of over AED 375,000 per year. It will be applied to all products and services, with the exception some food items, health, education, bicycles, and social services that are exempted. More information on these exemptions can be found here.
What is the procedure for registering for VAT?
Businesses can register for VAT tax through the Federal Tax Authority’s e-services portal. Businesses that maintain annual revenue of AED 150 million were required to register before October 31, 2017. Companies that fail to register may face a fine of AED 20,000 fine. More details on these rules can be found in the FTA’s VAT registration User Guide.