VAT Rate In UAE

Value added tax or VAT is an indirect tax, which is imposed on goods and services at each stage of production, starting from raw materials to final product. VAT is levied on the value additions at different stages of production. VAT rate in UAE is discussed below.

How it works :

The VAT system is invoice-based. Each seller in the product chain includes a VAT charge on the buyer’s invoice. Under a VAT taxation system, all sellers collect the tax and then pay it to the government. The VAT gives sellers along the supply chain a direct economic motivation to collect the tax, thereby reducing the incidence of tax evasion.

Through implementation of this tax system, government can raise revenues invisibly, where the tax is not shown on the bill paid by the buyer. VAT is different from sales tax in various aspects. While sales tax is to be paid on the total value of the goods and services, VAT is levied on every exchange of the product, so that consumers do not have to carry the total cost of tax. However, VAT is generally not applied on export goods to avoid double taxation on the final product. However, if VAT is charged on export goods, the tax amount is usually refunded to the tax payer.

UAE to implement VAT from 1^st January2018

The new taxation regime will be rolled out on January 1, 2018.

Value Added Tax (VAT) is set to make its debut in the six-nation GCC block in 2018.The UAE Minister of State for Financial Affairs, His Excellency Obaid Humaid Al Tayer, has stated that the UAE will implement VAT at the rate of 5% from 1^st January 2018.

VAT is expected to be introduced at a rate of5%withsome limited exceptions including basic fooditems, healthcare and education VAT will be another source of raising revenues for governments in the Gulf Cooperation Council (GCC).

It is estimated that the UAE will generate more than Dh12 billion additional revenues in the first year after implementation of this new tax.

GCC countries have decided to implement taxation as part of the governments’ efforts to diversify revenues in the context of sharp decline in oil prices. The International Monetary Fund has been recommending fiscal consolidation in the GCC through diversification of government revenues and reduction of subsidies.

Key source of income

The introduction of VAT will help the UAE government to generate an estimated Dh12 billion worth of revenue in the first year, which will increase to Dh20 billion in 2019.Collection of VAT will boost government revenues.

Rate of Taxation:

Taxation rate in UAE will be 5% on all goods and services. Government has decided upon the marginal rate of 5% in the interest of the residents, as purchasing power of the consumer will not be hampered to an extent. Thus implementation of VAT will not have adverse effect on the people who are on the lower end of the spectrum.

However GCC has agreed on three VAT rates that will levied by the member states at the time computation of tax:

• Standard Rate
• Zero Rate
• Tax Exempt

Standard Rate

The rate of 5% will be applied on the all the business sectors.(does not hold good for zero rated and exempted goods).It is mandatory  that all  invoices feature tax value separately and then be added to the final bill value. All invoices must also display VAT registration number to enable buyer to claim VAT credit.

Zero Rated:

As the term suggests, the tax is computed at the zero rate. The tax column in the invoice of the sold good will be zero. Only the cost of the good will be charged.

In the contrary if tax has been paid for zero rated goods, tax credit of purchases can be availed for the sold good. You will need to record any zero-rated supplies in your VAT account and report them on your tax return.

Zero Rated Items:

• Exports outside GCC
• Food items as per GCC list
• Medicine and Medical Equipment as per GCC list
• Supply of sea, land and air means of transportation
• International and Intra GCC transport and services
• Charity organizations
• Gold, silver and platinum – 99% and more purity
• First supply after extraction of gold, silver and platinum
• Supply for educational purposes and related goods and services beneficial for educations
• Residential real estate – first supply

TAX Exempt:

The Tax Exempt supplies are not charged with VAT; however any tax paid earlier on purchases of the item is not available for credit.

As an example consider a taxi service (local passenger transport) that is tax exempt and will not collect any VAT from passengers. Though it will not collect any tax it will not be able to get credit for the tax they have paid for purchase of motor vehicles.

GCC: Tax Exempt List

• Imports of goods which are custom exempt
• Local passenger transport
• Bare Land

UAE: Additionally exempt

• Residential buildings other than zero rated
• Some specific financial services – margin based

Penalties will be imposed for non-compliance.

Examples of actions and omissions that may give raise to penalties include: A person failing to register when required to do so
. A person failing to submit a tax return or make a payment within the required period
. A person failing to keep the records required under the issued tax legislation
. Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

Comparison Table of Vat rates of different countries

Analysts believe that VAT will not have a big impact on the cost of living as the rate is one of the lowest in the world. They said that the lower-income class is already aware of its income and expenses, so they know what and where to spend. However, the bigger impact could be on middle-income residents who earn around Dh20,000 as their grocery, fuel, kids’ school costs and others will increase marginally. Meanwhile, the high-earning class will not feel the impact considering their high incomes and low inflation.

There are more than seven million expats living in the UAE who send, on average $20 billion remittances to their home countries each year. Remittance fees are as low as Dh18 to as high as Dh55 for the United States, United Kingdom and European corridor.

Websites for information on  UAE VAT

WWW.reachaccountant.ae

https://government.ae/en/information-and-services/finance-and…/valueaddedtaxvat

www.allaboutvat.com/

https://www.thenational.ae/…/uae-tax-autho

http://gulfbusiness.com/uae-trity-launches-new-website-to-help-prepare.ax-authority-launches-website-details-vat-excise-taxes/

Snapshot of being VAT ready

1. Explore best VAT Software – Adapt and Align with your business activities
2. Build the organizational competency by educating your teams on the fundamentals of VAT and its impact on your business
3. Review your business processes, practices and procedures – mainly pricing, procurement, invoicing, logistics etc. in line with VAT requirements and align accordingly
4. Ensure books of accounts are accurate and update date
5. Inform your vendors and customers about VAT and subsequent impact on transactions
6. Preparation &Transitioning to VAT

How to file VAT Returns

As per the Federal Law No. (7) of 2017 on Tax Procedures, a taxable person needs to submit a VAT return in UAE with the information and data specified for Tax purpose in accordance with the form, specified by the Federal Tax Authority (FTA). Every taxable person is required to submit the VAT Return for each Tax period within the time prescribed by the FTA and this must be in accordance with the provisions of the UAE VAT law. The taxable person is also liable to remit the tax due to the FTA within the time frame specified by the UAE VAT Law.

The UAE VAT Executive Regulations has prescribed the mandatory information which needs to be declared by the registered person in his VAT Return. The following are the details which need to be contained in the VAT Return:

1. The name, address and the TRN of the Registrant: The Tax Registration Number (TRN) provided by the FTA needs to be furnished in all the VAT Returns. Based on the TRN number, the name and address details are expected to be auto-populated.
2. The date of submission: The VAT returns need to be submitted within 28 days following the end of the VAT return period. Here, the date on which returns are submitted will be captured.
3. Tax Period: Tax Period is the return period to which the Tax Return relates. For example, for January to March’18, it will be Jan-Mar’18.
4. Details of the Supplies (sales) made in the VAT return period: You need to furnish the value of supplies (sales) and output VAT collected during the return period. Also, the supplies need to be categorized into the following:
5. Standard Rated Supplies: This includes all the domestic supplies on which 5% VAT is applicable. Further, these details need to be furnished at the emirates level as shown below:
   1. Standard rated supplies in Abu Dhabi
   2. Standard rated supplies in Dubai
   3. Standard rated supplies in Sharjah
   4. Standard rated supplies in Ajman
   5. Standard rated supplies in Umm Al Quwain
   6. Standard rated supplies in Ras Al Khaimah
   7. Standard rated supplies in Fujairah
6. Zero rate Supplies: The details of notified supplies which are under Zero-rated list needs to be furnished in this section.
7. Exempt Supplies: Supplies such as financial services, residential building etc. which are notified as exempt supplies need to be captured here.
8. Reverse Charge Supplies: Supplies such as imports and other notified supplies on which the recipient or buyer is liable to pay VAT on reverse charge mechanism.
9. Intra GCC Supplies: Supplies made to customers registered for VAT in other GCC implementing states and for which the place of supply is the other GCC implementing state needs to be captured here.
10. Details of the expenses (Purchases) made in the VAT return period: You need to declare the value of expenses incurred on which you are eligible to recover Input Tax and the amount of Recoverable Input Tax in the VAT return period. Please note, the value of input tax credit which is restricted or which you are not eligible to claim, should be reduced from the total and only the net value needs to be mentioned. Also, the total expenses and recoverable Input Tax needs to be shown separately for standard rated expenses (on which 5% VAT was paid) and the expenses, subject to reverse charge.
11. The total value of Due Tax and Recoverable Tax: You need to mention the total output tax collected and recoverable input tax during the return period.
12. Payable Tax: This will be arrived at, after adjusting the Output Tax with Recoverable Input Tax. If output VAT is higher than input VAT, it will result in VAT Payable. Otherwise, it will be VAT refundable which can be carried forward to next return period or can be claimed as a refund.

The above are the some of the mandatory details which need to be furnished in the VAT return form. Apart from the above mandatory details which is applicable for most of the businesses in UAE, the return format consist other additional details listed below.

  Profit Margin Scheme

  Goods transferred to GCC implementing states

  VAT paid on personal imports via Agents

  Transportation of own goods to other GCC states

  Recoverable VAT paid in other GCC implementing states

  Tax Refunds for Tourists Scheme provided

The VAT returns are required to be filed electronically i.e. the businesses are required to generate the return file, either in XML or Excel format and upload it to the FTA portal. Thus, it is a must for businesses to have a software which will not only help the business to account for VAT but also helps the businesses to generate the valid VAT return forms in the format which is accepted by FTA.

Reach Accountant – VAT Software

Reach is`the ultimate destination to use software which suits 21 different business with end to end process. You can use Reach instead of using multiple software for different functions or trying to create a customized software. Reach software are VAT complaint which simplifies business.

Being a resident of UAE or business entity it is mandatory to align business operations as per the new taxation reform. There would be many questions and perceptions running in one’s mind. One of the important concerns would be will the business be affected if new prescribed rules and regulation regards to new taxation system are not adhered. Like filing returns on time, maintaining accounts of books ,generating invoices as per VAT mandate. A mentor preferably who can be there at all time to assist and answer all the queries relating to VAT. Reach VAT software is the perfect solution proving to be your best companion in the VAT transition period.

Reach Extended services can be availed by:

The above industries can avail the benefit of using Reach VAT Software to be VAT compliant.

Features Of VAT software:

Invoicing: Generates VAT compliant invoice of the company in the specified design as requested by the client or can choose from the available templates in the software. It also converts quotes to invoice .One of the features is the software can convert the Foreign currency invoices to base currency and further calculating the VAT at UAE standard rate.

Print Tax Invoice In Arabic: Reach software lets you print invoices in Arabic, English or both, as per the mandated guidelines of GAZT and FTA.

Auditor View: Full-fledged Financial reports, Tax reports VAT reports, read process by auditor, with e-filing options, PF & ESI Reports, Tax Consulting Modules are some to be named.

Check Post for VAT returns: As the software has been designed exclusively to aid individuals and entities to be VAT compliant in UAE, the set of rules and regulation laid by FTA (Federal Tax Authority) of UAE are embedded in the software. Hence any process error will be popped up by the application can be viewed .For instance wrong Tax Registration Number, incorrect taxable figure, wrong taxation period.

Automatic Update on Tax legal Sections: As the Reach software are cloud computed software gets upgraded to update any revised tax laws and section if any in future.

Computation Of VAT Returns: The software is inbuilt with all the detailed crucial information  on tax computation Tax Assesee can  fetch all the details of all the taxable transactions It lists down transactions which are included and excluded in the VAT return  calculate input tax, reverse charge and output tax to avail claim if any.

Mobile Application: Reach Software provides you the facility of managing business from any geographical location .The mobile application service sends you alerts as to which employee has dealt which transaction of the business process, this provides check and control measure, to track and record taxable transaction.

Tally Import: Import excel files from tally to Reach software and manage accounts with smooth transitions.

User Friendly: Software are designed is such a way that the user will find it easy to operate.

Software Integration: The client can integrate the existing software with Reach software seamlessly.

Security: Reach VAT software ensures security of all the confidential business information avoiding any kind of loss to the business.

Miscellaneous Add-ons: E-stores, Google docs, Google calendar , SMS gateways, Payment Gateways are few to name.

Pricing of the software: No upfront investment, Low monthly rentals, free servers, free routers, LAN, Network cabling not required, Anti-Virus not required, free data backup.

 i