What is VAT?
Value added tax is a tax levied by the UAE government on sales of goods and services. All businesses which exceeds the registration threshold, normally based on annual turnover which is yet to be decided by the UAE tax authorities must register for VAT and complete a VAT return.
When is VAT going to be implemented in the UAE?
The expected date of VAT implementation in the UAE is 1 January 2018.
How much is VAT?
Supplies of Goods and Services can either be:
- Standard rate:5%
- Zero rate:0%
These are called “Taxable Supplies”.
Examples of Standard rated Taxable supplies are most goods and services including vehicles, clothing, business consumables etc. On these goods VAT is charged at 5% on sales and any VAT paid on purchases can be adjusted against the net payment to tax authorities
Examples of Zero rated Taxable supplies are basic food items, essential medicines, export of goods and international services. On these goods VAT is charged at 0% on sales and all VAT paid on purchases can be reclaimed back from the tax authorities in form of a Refund.
There will be certain goods and services which are not subject to VAT. These are called “Exempt Supplies”. On these goods and services no VAT is charged on sales nor any VAT paid on purchases can be claimed back.
Examples of Exempt supplies are healthcare, insurance, financial services, sales and lease of residential properties, and domestic public transportation.
How Does VAT works?
Although VAT will apply to most goods and services there are some likely exemptions like: basic food items, essential medicine and export of goods and international services which are expected to be zero rated supplies.
Furthermore other supplies such as healthcare, education, sale or lease of residential property and finance and insurance are expected to be exempt from VAT.
VAT will be accounted for as follows:
- Youpay VAT on the items or services you buy from other business. This is your “Input Tax”.
- Youcharge VAT on the items or services you sell to other businesses and customers. This is your “Output Tax”.
How can Best Auditing & Accounting Help?
Best can help businesses by providing them a complete range of services as follows:
- Help your business to plan and be ready for VAT implementation
- Review and implementation of accounting software which are VAT compliant and best suited to your business
- VAT training courses for your staff
- VAT registration assistance
- VAT compliance and ongoing assurance
- Any other accounting, auditing, bookkeeping or financial advisory assistance
Contact Us on ………………. If you require help.