All you need to know about VAT in Dubai

UAE being a developed region has imposed certain level tariffs for all the business entities.

• Companies involved in import and export are being targeted by the VAT (Value added Tax.).
• UAE being a part of the international market has the same taxes which are levied inside the rest of 180 developed regions.
• All of the businesses both private and most of the government entities are under VAT.
• They influence each stage inside the supply chain.

What is VAT?

Value Added Tax (VAT) is being implemented by the state authorities of UAE for generating more revenue per annul.

• All of the resellers or business enterprises collect the tax on behalf of the state.
• When VAT was Imposed inside the UAE It was back in the year of 2018 that the UAE government levied a “5” percent VAT tax on all goods and services.
• VAT (Value Added Tax) comes in to play whenever there is a sale and purchase process. VAT is applied on all the businesses which exceed a certain level of revenue generated per annul.

On what business VAT is imposed

The businesses are being evaluated on the basis of the revenue it generated.

• VAT is applied on enterprises which are involved in the supply and import while: Exceeding revenue of AED 375,000 per annual.
• VAT is also applicable on enterprises which generate about AED 187,500 per annual.
• All the businesses which are registered inside the mainland and free zones.
• The Free Zone which is treated as a “designated” zone is then treated as outside of UAE and thus no VAT is imposed.

Importance of VAT inside UAE

With the arrival of multinational and local businesses inside the marketplace the UAE government thought for an alternative to sustain the economy and raise revenue for public services.

• Non-renewable resources have been the main source of revenue for the UAE government before VAT came into play inside the region.
• The amount of revenue generated from VAT at the end of 2018 was about AED 31 Billion.
• VAT made up 5.5% of total public revenue of UAE in the year of 2018.

How to register businesses for VAT?

Business Setup businesses are able to process the operations related to VAT registration.

• Company Setup Consultants has the expertise in Business registration with the authorities to avoid any of the legal complications.

Types of VAT Registration Services

• VAT Return Filing– Business Setup Consultation.
• VAT advisory – VAT de-registration Services.
• VAT Training – VAT Planning and construction.
• Financial Reporting – FTA Complaint Books of Accounts.
• VAT Implementation – Assist.
• In FTA Complaint Documentation.

Advantages of VAT

• Value Added Taxes is essential for the State authorities to provide the public with quality services.
• The 5 percent VAT tax is imposed by the States indirectly on the goods and services which does not affect the seller but the whole supply chain is under its influence.
• VAT is easier to manage for the authorities.
• VAT is a sort of neutral which means all businesses are influenced by it.
• Consumers are not exposed to high taxes as the VAT is collected in installments.

Disadvantages of VAT

• For VAT the processes of the different stages of the supply chain is required which is expensive.
• Total compliance cost will increase as a history of the transactions has to be kept safe.
• Most of the middle class suffer due to VAT as they spend most of their fortune.

Examples of value added tax.

Starting from the basic raw materials for making the item.

• Let’s say if the manufacturer pays the dealer about AED 5 to purchase these elements, about AED 0.5 will be paid to the state government.
• Now, that the manufacturer supplies the same item to a reseller it would worth around AED 105.
• The reseller on selling out the item keeps the AED 100 and pays the state authorities with AED 5.
• So, what we see is a series of processes which have influenced all of the supply chain.

Vat vs hidden tax

• VAT taxes are not hidden like other sales taxes but the consumers are entirely aware of VAT.
• Sales taxes supercharges all on top of sales taxes but are not itemized.
• VAT is levied with the same percentage on all the goods and services.
• The VAT is said to be playing a great role in raising great revenue for the state to provide more quality public services and improve the infrastructure as well as working on the economy.