UAE completed its first year of the implementation of value-added tax (VAT) at 5 per cent; one of the lowest in the world. VAT is implemented at each step of the supply chain of goods and services in order to broaden the government’s revenues sources. Imposition of VAT on Businesses was very much transparent and fruitful in terms of growing revenue for the government.
Who needs to take VAT registration?
The registration for VAT is mandatory for any natural or legal person who carries out business and their taxable supplies exceed Dh375,000 ($100,000) during the previous 12 months or are expected to exceed that amount in the next 30 days.
Implication of VAT on businesses
Businesses will be bound to record their business income, costs and associated VAT amount imposed or charged. Customers will be obliged to pay VAT on goods/services to the suppliers. VAT will be deemed refundable if businesses that collect VAT on sales is than VAT they paid to suppliers.
When should businesses do VAT return filing?
Businesses with annual turnover below AED 150 million are bound to file VAT return quarterly and with annual turnover of AED 150 million and more are bound to file VAT return monthly. The FTA may assign different tax period for certain type of businesses. VAT registered businesses or the legal persons must submit a VAT return to Federal Tax Authority (FTA).
The Federal Tax Authority has announced 20 designated zones that are exempted from the recently implemented 5 per cent VAT. FTA have initiated a scheme for tourists to get refund for the tourists under the official tourist refund scheme and businesses are required to provide the details regarding the same in the VAT Return Filing.
VAT Return Form should be filled and the net amount payable will be automatically calculated. In case the payable value is negative, you can opt for a refund or to carry forward to the next Tax period.
For more information about VAT on business in UAE, visit www.tax.gov.ae/faq.aspx#business