Facts about VAT Implementation and Registration Services in UAE

The United Arab Emirates (UAE) a member of the Gulf Cooperation Council (GCC) is getting ready to roll out the new Value Added Tax (VAT) regime on the first day of the New Year. But, what does VAT actually mean? How does it impact common man’s life? The aim of this post is to throw some light in this direction.  

VAT implementation in Dubai, UAE, a GCC member country, can be considered as another source for raising government’s revenues. According to estimates, the UAE government will generate additional revenues of over Dh12 billion in the first year of implementation of the VAT.

The decision to implement VAT was taken by the governments in GCC member countries with a view to diversifying revenue sources in the wake of a sharp drop in oil prices. Further, the recommendation of the International Monetary Fund (IMF) that the members of the GCC should diversify their revenue sources and reduce subsidies to achieve fiscal consolidation had put the countries under pressure.

As part of the implementation of VAT in the UAE, it is mandatory for companies reporting annual revenues of more than Dh3.75 million to register under the VAT system. On the other hand, registration is optional companies earning revenues in the range of Dh1.87 million to Dh3.75 million during the first stage of VAT implementation. Eventually, all companies will have to have VAT registration. 
Even after VAT implementation & UAE VAT registration services, the UAE will continue to remain tax-free in several ways. This is because salary income is not taxed in the country. Further, free zones would continue to be tax havens, offering even complete ownership for foreign investors.

In order to ensure that the impact of VAT on common man is minimal, the government may either exempt or zero-rate many supplies. Most governments implementing VAT focus on taxing consumers’ discretionary expenditure. This is to protect people earning lower incomes. 

According to an announcement made earlier by the UAE government, VAT will not be applicable in the case of 100 food items, health, bicycles, education, and social services. However, VAT will be applicable in the case of electronic items, smartphones, cars, watches, eating out, jewellery, and entertainment. It is also expected that the GCC members will levy excise duties on beverages that are harmful to health, especially those that have high sugar content.

Companies supplying products or services for which VAT is applicable will be allowed to reclaim VAT on costs. On the other hand, VAT cannot be reclaimed when supplying products or services exempted from the VAT.

As VAT is levied on the price paid by the customer, cost of products and services may increase. However, suppliers can decide the price of the products or services they provide. 

There is hardly any time left to clearly understand the implications of the value-added tax system and make the required changes. In addition, the complexity and size of a business will determine the amount of effort required to implement changes. However, it is important to take the impact into consideration and deal with it in the best possible manner.

If you are looking for VAT consultation and registration services in Dubai, please call Business Link UAE at +971 43 215 228 or email to us at info@businesslinkuae.com. We are VAT Consultants in Dubai and we provide VAT registration services, and Accounting and auditing services for small and medium companies. We have a thorough understanding of UAE rules and regulations and the requirements to be met for setting up different types of businesses. We work with complete transparency and clients will not be burdened with hidden costs. In addition to providing cost-effective business solutions, we work as per the time frames agreed upon.