Vat in Dubai and UAE - 10 Important Things You Should Know About GCC VAT System

05 Sep 2017
blog

The new regime of taxation will be taken off on January 1, 2018 in UAE

Value Added Tax (VAT) is set to make its introduction in the six-country GCC block in 2018. What is the meaning of VAT? What are the ways by which it affects the common man? We try to answer some of the usually asked questions in the primer below.

What Is The Meaning of Dubai And UAE VAT?

UAE VAT will be another revenue incomes for governments up in the Gulf Cooperation Council (GCC).
There is an estimation that the UAE will produce more than Dh12 billion extra incomes in the first year after this new tax has been implemented.

GCC nations have chosen to execute tax as part of the governments' endeavors to make incomes diversified with regards to sharp decrease in oil costs. The International Monetary fund has been suggesting fiscal consolidation in the GCC by diversifying government incomes and subsidy reduction.

When Is VAT Going to Be Executed in UAE?

From the beginning of 2018 at 5%, Vat will be introduced alongside other Gulf nations.

How Does UAE Vat Function?

The undersecretary of the UAE ministry of finance, Younis Al Khoury, stated that Companies or Organizations in the UAE that report yearly incomes of over Dh3.75 million will be obliged to be registered under the GCC VAT system.

Al Khoury additionally affirmed that companies whose incomes fall between Dh1.87 million and Dh3.75 million will have the choice to register for VAT during the first phase of the implementation of the VAT.
He specified also that it will become required of all companies to register under the system, when it is taken off in the second stage, irrespective of the reported incomes.

Is Everything Going to Be Taxed?

Even after the implementation of VAT, the UAE will remain tax-free from diverse ways as there is no wage charge on pay rates in the nation. Free zones in the nation offers tax free environment as well including 100% ownership in free zones, simplicity of doing business.

Government is probably going to utilize its capacity to either zero-rate or exempt many supplies that would impact the common man by ensuring that the effect of VAT is kept to a minimum? Most especially, the aims of most governments while introducing a VAT is with concentrate more on taxing discretionary spend by buyers, while making sure that those at the lower end of the spectrum are secured as well as helped.

What is Going to Be Exempted from The Tax?

100% food items, health, education, bicycles as well as social services has already been officially reported by the UAE government to be exempted from VAT.

What is Going to be Taxed?

Things that would fall under the taxed category include:

Jewelry, smart phones, eating out, watches, cars, entertainment and electronics.GCC nations are likewise expected to introduce obligations on specific beverages that are considered to be destructive to health, as well as those with high sugar content.

Is VAT Going to Be a Cost to The Business?

You’ll be entitled to reclaim VAT you incur on costs, where you’re involved in the supply of products or services subject to VAT (zero rate included).VAT will be a cost to your business (as providers will charge VAT that you can't reclaim) where you’re involved in activities excluded from VAT and you can't reclaim VAT on incurred costs.

Is it Going to Affect costs/Margins?

AT is known as a tax on consumption and it’s as well levied on the price charged to the client. In this way there is an expectation that there’ll be price increment based on the amount of VAT. It is most importantly a matter for providers to decide the price of their products/services. The price will take account of VAT, i.e. regardless of charge Dh100 or Dh105, VAT will be included in the amount.


Do I Have to Start Getting Ready For VAT? What Am I Supposed To Be Doing Right Now?

There is actually a time to consider what the implications of VAT are and to make the changes that are necessary. The amount of work needed will solely depend on the size as well as the complexity of your business and it is necessary you put into consideration the effect now and decide how best to handle it.

VAT is Being Considered By The GCC, Why?

Governments have been thinking about the income sources diversification and this is significantly more the case given the developments affecting government incomes negatively in the region like the reduced income from oil revenues.

Visit https://www.mof.gov.ae/En/budget/Pages/VATQuestions.aspx for more information about UAE VAT

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