VAT Implementation in UAE

What is VAT?- VAT Implementation in UAE

It is a form of tax that is charged on the domestic consumption of goods and services except for that   are zero rated such as food, medicines etc and on the goods and services that are classified as “Exempted” broadly on exports. The tax is levied at every stage from procurement of raw material, production and till distribution chain that is up to sales. The amount of VAT the user pays is on the cost of the product, less the tax that has already been paid during the production cycle. This form of taxation (VAT) ensures there is no double taxation of the same product or services.

Why VAT Implementation in UAE

Gulf countries have always been away from all types of taxes; however, import taxes are imposed on companies that import goods into UAE. In the past one year, the fall in the oil price had a great impact on the Gulf economies. It seems the gulf countries have lost more than $300 billion due to the fall in the oil prices. This was one ill effect of being reliant on one source of income. The government has now decided to diversify the economy away from oil and gas.

UAE government also provides services like hospitals, roads, public schools, parks, waste control, and police which are usually covered through Government budget. However, VAT will provide with a new source of income, which will help in continuing these services at high quality. VAT is one such source of income which will provide huge impetus to the governments revenue.

Advantages Of VAT Implementation in UAE

VAT has been incorporated in all business transactions from January 1^st 2018.It will be a milestone for UAE as it will generate revenues for development of infrastructure and economic growth of the country. It is estimated that with the introduction of the new form of taxation “Value Added Tax” the economy may raise its annual revenues by Dh 12 billion in the first year of implementation of the VAT system. Gulf Cooperation Council (GCC) decided upon the implementation of VAT system as being one of the steps to diversify revenues due to the fall in oil prices. Tax reform was top priority in UAE succumb to the fall in oil prices and revenues. This fall in oil prices also affected real estate industry impacting the economic growth of the country. An indirect consumption tax regime like VAT is a natural progression of GCC government fiscal policy moving towards more effective and efficient tax systems in a competitive and integrated global economy. VAT could help the government to improve business conditions and maintain its reputation of being business friendly.

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

Who should register under VAT- VAT Implementation in UAE?

Mandatory Registration

A business must register if:

• The total value of their taxable supplies made within the UAE exceeds the mandatory registration threshold over the previous 12 month period, or
• They anticipate making taxable supplies with a value exceeding the mandatory registration threshold in the next 30 days.
• The mandatory registration threshold will be AED 375,000.

Voluntary Registration

A business may apply to register if they do not meet the mandatory registration criteria and:

• The total value of their taxable supplies or taxable expenditure in the previous 12 months exceeds the voluntary registration threshold, or
• They anticipate that the total value of their taxable supplies or taxable expenditure will exceed the voluntary registration threshold in the next 30 days.

The voluntary registration threshold will be AED 187,500

Details required for registration:

• Description of business activity
• Last 12 months turnover figure
• Projected future turnover figures
• Expected Import and export values
• Whether company is interested in dealing with GCC suppliers or customers.
• Details of custom authority registration.
• Trade License
• Emirates ID Authorized signatory can be a person who has the power of Attorney to sign on behalf of the business.
• Certificate of Incorporation
• Articles of Association
• Bank Details.

Steps for UAE VAT Registration Process:- VAT Implementation in UAE

1. Go to FTA Online Portal.
2. Sign up for a new account.
3. After successful sign-up, start your registration process as guided on the FTA website.
4. Enter relevant details and submit the application.
5. On successful submission, Tax Registration Number (TRN) will be provided to the user.

The sign-up details will be used as your login and password.

A user needs to verify the email address and other details as and when required.

Businesses will be notified by email and SMS when your TRN is generated.Upon Successful registration TRN Tax Registration Number will be issued within 20 days .

How should businesses prepare for VAT implementation in UAE

• Start maintaining your financial records in orderly manner;
• Businesses will now need to develop more efficient processes;
• Cost cutting on all fronts that you feel are unnecessary;
• Restructure your business to incorporate new talent who are able to multi task;
• Incorporate a robust accounting system that has VAT module;
• Get professional help for right ways to implement systems;
• Hire professional CA firms who could do the groundwork or leg work for your business for implementation;
• Assess capability of existing systems;
• Identify VAT implementation strategy;
• Identify contracts that need a VAT action;
• Identify inter-company transactions;
• Undertake training / awareness

• Using appropriate software meeting all the business requirements post implementation of VAT

Reach Accountant Online VAT Accounting Software– VAT Implementation in UAE

It is very essential that businesses use a software which will enable the task of maintaining records and managing accounts efficient. Businesses should carefully evaluate and decide a software which will help them in maintaining systematic and error-free accounts and records with compliance validation. The business software should be their instrument for compliance under VAT while helping them maintain their focus on the core business activities.

Need to upgrade to Reach Online VAT Accounting Software :

Reach Accountant software is well designed to match all the needs for successful running of the business. The software can be used in different industries ,traders ,manufacturers, retailers,  workshop ,business projects etc. It is an online VAT accounting software that can automatically manage your book of accounts, taxes, inventory, sales, purchases and more online quickly and securely. 

Benefits Of Reach Online VAT Accounting Software

Reach Online accounting software systems are rapidly evolving, giving business owners the ability to choose how and where they manage their finances. Whether at home or on-the-go, business owners are now able to execute administrative functions such as instantly viewing bank balances, tracking expenses, sending invoices ,supervising the work flow of branches through Reach online VAT Accounting Software thus making business more viable.There are many advantages of using an online accounting system including:

Reach online VAT accounting system can help you manage your business by improving your recordkeeping processes and give you the tools you need to analyze business results and make sound financial decisions.

• Online Access 24/7
• Cost
• User Friendly
• Technical Support
• Efficiency
• Analysis –
• Security and Accuracy
• Inter Connectivity of Branches:
• Opportunities
• Scalability

Top Features of the Reach Online VAT Accounting Software are:

• Accounting Management: All functions relating to accounts are inbuilt with the software. You can manage your Accounting Ledgers, Bank & Cash Operations, Purchase & Sales Estimates, Warehouse Allocations, Expense Recording, Expense Grouping, Payments – Part or Full, Journal Entries, Income and loss a/c, Balance sheets, Receipts – Part or Full, Contra Entries, Financial Reports, Day book.

• Tax Management: Our accounting Software automatically calculates the taxes relevant for every bill created. The Software is designed as per the government norms for calculation of VAT. It also has the option to add any number of taxes relevant to the business. In case of change in tax percentages a change it in the software on your own. All you have to do is add your tax percentage and our software will calculate the taxes automatically. This multiple tax scheme can also be applied to multiple products on a single purchase.

• Income Management: The Company can create Quotations then the same can be converted as a Sales order or Pro-forma invoice or Invoice. From Invoice you can create Receipts as well. Accountants will be able to know what payments have been received and what are pending in the reports. You can also set reminders for receiving payments.

• Expense Management: You can create Purchase Orders then the same can be converted as bill or payments. You can also create Debit notes for purchase returns. Accountants will be able to know which purchase bills have been paid and which are pending in the reports. You can also set reminders for making payments.
• 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

• Filing Of VAT Returns: The registered businesses in UAE are required to generate the VAT return File from their accounting software, login to the FTA’s e-tax portal and upload the return file. On the basis of the uploaded return file, the e-tax portal will validate the file and accordingly the details from the file will be auto-populated in the online return form. Reach VAT software is designed to ease the process of filing returns and comes under the purview of FTA prescribed set of rules and regulations.

• * VAT Reports etc.
• Calculate VAT automatically.
• VAT support in Sales, Purchase, Sales and Purchase returns, Journal entries.
• Generate Federal Tax Authority compatible tax reports.
• VAT Paid (charged by suppliers) and Vat Collection (Charged to customers) Analysis.
• Transaction wise details of VAT paid and VAT collected.
• Attach every Vendors/Customers VAT number and other details.
• VAT supported for Goods (stocked) and Service (non-stocked) items.
• Online application accounting.
• VAT Account Reconciliation, VAT Collection & VAT Paid analysis report.
• Report export to excel and other standard formats.
• VAT returns statement compatible with Federal Tax Authority standards.

Online accounting VAT software enables you to file vat returns, manage accounts and other business operations from any geographical area be it at the comfort of the house.

• Receipt: Receipts can either be manually entered or imported it in excel format easily.
• Payments: Payments can either be manually entered or imported it in excel format easily.
• Multi Company: Manage business through comfort of the smart phone.
• Tally Import: Tally files can be easily imported to Reach Software of various periods and manage business easily.
• Auditor’s Report: Full Financial Report are available,Read process by Auditor,Tax Reports,VAT Report with e-filing options,PF & ESI Reports,Tax Consulting Modules are some featuress mentioned.
• Mobile Application: Access business information through tabs and android smart phones, pick photos of expense vouchers and attach to expenses, daily profitability and other key reports can be viewed on phone.
• Bank Synchronization: Bank Statements can be imported in to Reach software through excel files.
• Security: There is complete security of data stored in the hard disk. Data can be accessed and control by creating access restriction. One time password facilities also ensures a check in the log in to the website.

• Run Business from anywhere: The business can be run access data from anywhere at your comfort. Just like checking mails from the laptop or systems.

• Free and Automatic Upgrades: At Reach Accountant you will be provided free services of upgrading the software frequently with new features and use it absolutely free.

• No investment in expensive hardware: The software is browser based. It just requires internet connection which can be connected to multi computers without using LAN and servers.

• API: The client can integrate the existing software with Reach accounting application ,
• Automatic Data Backup: Reach stores all the data in servers offsite with regular backups. Hence business information is safe and secure

·         User Interface & Complexity:The software is designed to make its use friendly and easy,no cumbersome process to operate the application and software.

• Scalability:It is an VAT accounting software which can scale with your business needs. . Some software companies offer only one version of the product and some have progressive versions depending the business type or size. Reach Accounting software offers both integrated an entry level version as well as a feature rich version which you might not need for the current business processing but will definitely need in future for business development.

Top Two Features of the Reach Accounting Software

• Outsourced Accounting: The software enables to finish the outsourced accounts in less than 30 minutes.

• Real Time Accounting: Allows client to record sales and purchases online, while finalizing accounts that is checking the Audit trail, providing MIS reports, checking Tax reports, printing financial reports and filing taxes.

Technology Used

Reach has implemented the latest technology Cloud Computing to handle  day to day business transactions just  a click away from your browser from any part of the world.

Cloud accounting software that is easily accessed online and an attractive option for large or small business owners. Companies that use cloud accounting require less initial server infrastructure to store data and don’t require IT staff to maintain or update the cloud accounting system. Get the spectacular benefits of cloud accounting as you seamlessly integrate with the powerhouse

Benefits of cloud accounting:

• Streamline billing and ordering processes
• Capture and store financial data to most accurately model and report on your finances
• Use Chatter to enable more effective collaboration across your organization
• Greater return on investment and real-time, multi-dimensional financial analysis