UAE consumers are expected to pay VAT on the purchase of most goods and services. The UAE Minister of State for Financial Affairs has stated that the UAE will implement VAT at a rate of 5% on January 1, 2018. There are some exceptions that will not be taxable, which may include basic food, medicine/care medical, education, etc. . Other GCC countries may also implement VAT from January 1, 2018 or January 1, 2019.
What is the reason behind the implementation of VAT in the United Arab Emirates?
The government provides public services to citizens and residents, such as hospitals, roads, public schools, parks, waste control, police and defense services, and much more. To cover the costs of its services, the government has to generate huge revenues. It can be achieved by collecting taxes. UAE is the member nation of GCC, it is very closely connected through “The Economic Agreement between the GCC states” and “The GCC Customs Union”. All GCC member countries have worked together on the design and implementation of new public policies.
Threshold for VAT registration
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If the company’s annual turnover is less than AED 187,500, the company does not need to be registered under the law.
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If the company’s annual turnover is between AED 187,500 and AED 375,000, it is optional to register under UAE VAT law.
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The company is required to register under UAE VAT law if the company’s annual turnover exceeds AED 375,000. Special rules will apply to Real Estate Businesses and it is expected that special rules will apply to intra-CCG commercial property.
What are the necessary steps to be taken by companies in the UAE?
Businesses need to find out if their goods or services are subject to tax. If they are subject to VAT law, they must register on the VAT registration platform before the end of 2017. They must make the necessary changes in financial management and accounting along with recording their financial transactions, carefully documenting their business income. , costs and associated VAT charges. . Make the necessary changes in technology and human resources to prepare for VAT and also the changes that will be made in your accounting software. Companies have the option of hiring VAT professionals or outsourcing the work. Any taxpayer must keep VAT invoices issued and received for a minimum of 5 years. When the government publishes the proper guideline and law, companies need to clarify with professionals whether their goods and services are subject to tax.
VAT compliance audit
Companies in the United Arab Emirates are not sure if they have filled out their declarations correctly and some filled them out incorrectly. After the implementation of VAT, companies must file their VAT returns, either monthly or quarterly, as required by the Federal Tax Authority. No mistake should be made when presenting the forms to the authority to avoid the sanction.
At Alliott Management Consultants, our steps to perform a compliance audit are simplified in
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Accounting/Bookkeeping Software Review.
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Review the entry/exit tax.
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Regularly review your VAT returns.
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Checking the amount of tax owed.
For companies in the United Arab Emirates, if you need consultation on VAT registration, filing and returns, please schedule an appointment with Alliott Management Consultants by clicking here or email