Key definitions under VAT Decree-Law-No-8-of-2017 of UAE

Posted by Roohi Shabir | February 17, 2018 | Uncategorized

Key definitions under VAT Decree-Law-No-8-of-2017 of UAE

VAT has come in effect to all business transactions from January 1^st 2018.It will be a positive reaction 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. Standard VAT rate of 5% will apply to goods and services unless specifically declared as zero rated or exempted.Key definitions under VAT Decree-Law-No-8-of-2017 of UAE is explained below.

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

For the benefit of UAE residents UAE government has listed terms for better understanding of VAT

Key definitions under VAT Decree-Law-No-8-of-2017 of UAE

Term	Meaning
State	United Arab Emirates Minister
Minister of Finance Authority	Federal Tax Authority
Value Added Tax	A tax imposed on the import and supply of Goods and Services at each stage of production and distribution, including the Deemed Supply.
Standard Rate	Standard Rate or Taxable supplies are those supplies which will have an impact of 5% VAT in the UAE
Zero Rate	Zero-Rated Supplies are those supplies on which the rate of VAT is 0%. But in zero rated supplies input tax, can be deducted.
Tax Exempt	Exempt Supplies are those kinds of supplies which are unaffected by VAT implementation in the UAE. Tax amount is not charged on such supplies. Hence, the input tax in the exempt supply cannot be deducted.
Tax	Value Added Tax
GCC States	all countries that are full members of The Cooperation Council for the Arab States of the Gulf pursuant to its Charter
Implementing States	The GCC States that are implementing a Tax law pursuant to an issued legislation.
Goods	Physical property that can be supplied including real estate, water, and all forms of energy as specified in the Executive Regulation of this Decree-Law.
Services	Anything that can be supplied other than Goods.
Import	The arrival of Goods from abroad into the State or receipt of Services from outside the State.
Concerned Goods	Goods that have been imported, and would not be exempt if supplied in the State.
Concerned Services	Services that have been imported, where the place of supply is in the State, and would not be exempt if supplied in the State.
Person	A natural or legal person.
Taxable Person	Any Person registered or obligated to register for Tax purposes under this Decree-Law.
Taxpayer	Any person obligated to pay Tax in the State under this Decree-Law, whether a Taxable Person or end consumer.
Tax Registration	A procedure according to which the Taxable Person or his Legal Representative registers for Tax purposes at the Authority.
Tax Registration Number (TRN)	A unique number issued by the Authority for each Person registered for Tax purposes.
Registrant	The Taxable Person who has been issued with a TRN.
Recipient of Goods	Person to whom Goods are supplied or imported
Recipient of Services	Person to whom Services are supplied or imported
Importer	With respect to importing Goods, it is the Person whose name is listed as the importer of the Goods on the date of Import for customs clearance purposes. With respect to Services, it is the Recipient of these Services.
Taxable Trader	A Taxable Person in the Implementing States, whose main activity is the distribution of water and all types of energy as specified in the Executive Regulation of this Decree-Law.
Tax Return	Information and data specified for Tax purposes and submitted by a Taxable Person in accordance with a form prepared by the Authority.
Consideration	All that is received or expected to be received for the supply of Goods or Services, whether in money or other acceptable forms of payment
Business	Any activity conducted regularly, on an ongoing basis and independently by any Person, in any location, such as industrial, commercial, agricultural, professional, service or excavation activities or anything related to the use of tangible or intangible properties.
Exempt Supply	A supply of Goods or Services for Consideration while conducting Business in the State, where no Tax is due and no Input Tax may be recovered, except according to the provisions of this DecreeLaw.
Taxable Supply	A supply of Goods or Services for a Consideration by a Person conducting Business in the State, and does not include Exempt Supply
Deemed Supply	Anything considered as a supply and treated as a Taxable Supply according to the instances stipulated in this Decree-Law.
Input Tax	Tax paid by a Person or due from him when Goods or Services are supplied to him, or when conducting an Import.
Output Tax	Tax charged on a Taxable Supply and any supply considered as a Taxable Supply
Recoverable Tax	Amounts that were paid and may be returned by the Authority to the Taxpayer pursuant to the provisions of this Decree-Law
Due Tax	Tax that is calculated and charged pursuant to this Decree-Law.
Payable Tax	Tax that is due for payment to the Authority
Tax Period	A specific period of time for which the Payable Tax shall be calculated and paid.
Tax Invoice	A written or electronic document in which the occurence of a Taxable Supply is recorded with details pertaining to it.
Tax Credit Note	A written or electronic document in which the occurence of any amendment to a Taxable Supply that reduces or cancels the same is recorded and the details pertaining to it.
Government Entities	Federal and local ministries, government departments, government agencies, authorities and public institutions in the State
Charities	Societies and associations of public welfare not aiming to make a profit that are listed within a Cabinet Decision issued at the suggestion of the Minister.
Mandatory Registration Threshold	An amount specified in the Executive Regulation of this DecreeLaw; if exceeded by the value of Taxable Supplies or is anticipated to be exceeded, the supplier shall apply for Tax Registration.
Voluntary Registration Threshold	An amount specified in the Executive Regulation of this DecreeLaw; if exceeded by the value of Taxable Supplies or taxable expenses or is anticipated to be exceeded, the supplier may apply for Tax Registration.
Transport-related Services	Shipment, packaging and securing cargo, preparation of Customs documents, container management, loading, unloading, storing and moving of Goods, or any another closely related services or services that are necessary to conduct the transportation services
Place of Establishment	The place where a Business is legally established in a country pursuant to the decision of its establishment, or in which significant management decisions are taken and central management functions are conducted.
Fixed Establishment	Any fixed place of business, other than the Place of Establishment, in which the Person conducts his business regularly or permanently and where sufficient human and technology resources exist to enable the Person to supply or acquire Goods or Services, including the Person’s branches
Place of Residence	The place where a Person has a Place of Establishment or Fixed Establishment, in accordance with the provisions of this Decree-Law.
Non-Resident	Any person who does not own a Place of Establishment or Fixed Establishment in the State and usually does not reside in the State.
Related Parties	Two or more Persons who not separated on the economic, financial or regulatory level, where one can control the others either by Law, or through the acquisition of shares or voting rights.
Customs Legislation	Federal and local legislation that regulate customs in the State
Designated Zone	Any area specified by a Cabinet Decision issued at the suggestion of the Minister, as a Designated Zone for the purpose of this Decree-Law.
Export	Goods departing the State or the provision of Services to a Person whose Place of Establishment or Fixed Establishment is outside the State
Voucher	Any instrument that gives the right to receive Goods or Services against the value stated thereon or the right to receive a discount on the price of the Goods or Services. Vouchers do not include postage stamps issued by the Emirates Post Group
Activities conducted with Sovereign Capacity	Activities conducted by Government Entities in their sole competent capacity, with or without Consideration.
Capital Assets	Business assets designated for long-term use. Capital Assets Scheme: A scheme whereby the initially recovered Input Tax is adjusted based on the actual use during a specific period.
Administrative Penalties	Amounts imposed upon a Person by the Authority for breaching the provisions of this Decree-Law or Federal Law No. (7) of 2017 on Tax Procedures
Administrative Penalties Assessment	A decision issued by the Authority concerning any Administrative Penalties due.
Excise Tax	A tax imposed on specific Goods.
Tax Group	Two or more Persons registered with the Authority for Tax purposes as a single taxable person in accordance with the provisions of this Decree-Law

Key definitions under VAT Decree-Law-No-8-of-2017 of UAE

How should businesses prepare for VAT implementation?

With the introduction of VAT in UAE, there are considerations that businesses would have to take care of with regard to tax consulting of VAT and amending business policies.

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;-Reach Online VAT Accounting Software –UAE
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

Need to upgrade to Reach online VAT Accounting Software :

In the VAT regime from 2018 onwards, software will play a key role and it will define the success of your business in the field of compliance adherence. For businesses, having the right online VAT accounting software is a must. The software will help the businesses in accounting VAT with ease and generate accurate VAT return files in XML or Excel format.

Appropriate online VAT accounting software is one which helps in accounting the VAT records with in-built capabilities to prevent, deduct and allow seamless corrections of errors or discrepancies so that all the records and the returns are authentic Thus, the businesses need to carefully evaluate the software which will help you in hassle free transition of your businesses to new VAT regime, ease of accounting VAT and filing returns.

Reach Accountant VAT 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 accounting software that can automatically manage your book of accounts, taxes, inventory, sales, purchases and more online quickly and securely.

Features of the Reach Online VAT Accounting Software In detail 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 features 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.

Global Tax Support

Regardless of where you are, our integration provides worldwide support. If you’re located in any part of the world you will be asked to file your tax returns on or before due date.

24/7 Unlimited Support

Reach customers enjoy unlimited, free support delivered through a range of options – including email, comprehensive online help and online communities.

Top Two Features of the Reach Online VAT 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 Computing is a concept through which organizations can manage their data centres, processes and applications online via internet on the scheme of pay for use basis.

Advantages of Cloud Accounting Software:

– Nothing to install. Just signup and start entering your transactions
– You don’t have to worry about upgrades as all changes are pushed automatically. Online softwares are always up to date.
– Can be accessed from any internet enabled device at any point of time
– Cloud accounting software providers take care of backup and maintenance which is a cost saving for you.
– Data across all your offices is always synchronised.
– It can integrate with other cloud based applications.

Reach have established themselves as long-term experts in user-friendly business accounting. Their accounting software makes it easy to manage income and expenses, unlimited bank transactions, and even generate reports for better decision making. With pricing plans for every business type, from a small start-up to a rapidly growing international business, you’ll definitely be able to find the right plan for your business. The system comes with full customer support and the various pricing options making value for money in terms of initial cost and Return on Investment.

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Key definitions under VAT Decree-Law-No-8-of-2017 of UAE