UAE has recently started to impose VAT taxes on its residents. It goes way back to 2018 when the Government of The UAE officially announced that VAT would be implemented on the residents’ goods.
Since you are reading this article, chances are you are planning to invest in UAE soon, and you are worried about the nitty-gritty of VAT Laws in the UAE. If that indeed is the case, then I would strongly recommend you to read this article to the end as in this article I will be telling you everything you need to know about the VAT Laws In the UAE. Visit the given link to know more.
According to the UAE’s Government, the imposition of VAT is expected to give UAE’s economy a big boost. It is also anticipated that it would generate a whopping 12 Billion Dirhams in 2021. So without any further adieu, let us take a close look at the VAT Laws In The UAE.
VAT Laws In The UAE: Why You Need To Pay Attention? 5 Things to Know!
Below are the seven things you need to know as to why VAT Laws are so important in the UAE and why you should not take them in a light manner.
#1: Why is UAE hell-bent on imposing VAT?
The major reason UAE has imposed VAT on its residents is that they provide their residents with various services like hospitals, parks, schools, etc. The UAE government pays for all these services. So implementing vat would be a new source of income for the UAE Government. They do not want to be solely dependent on oil, and they are striving hard to make their economy a trade-based economy; that is why they are implementing VAT. This process will help them make a sustainable future and reduce their dependence on oil.
#2: Rate of VAT And The Sectors In Which They Are Implemented
This is the part where you need to be very attentive. As of now, the VAT rate has been fixed to five percent and is imposed on most goods and services, which includes hotel services, food, and commercial buildings.
There is a provision where a VAT of zero rates is imposed, and the sectors where zero rates are imposed are educational services, health, and the investment of gold. The UAE Government has no intention of imposing VAT taxes on local transportation and the supply of a few financial services.
#3: Comparison Of Exempt Supplies And Zero Rated Supplies
Sectors that are subject to zero rate VAT are required to register for VAT. There are also a few sectors where no VAT is required; these businesses are not permitted to recover VAT which they paid on their purchases.
#4 Retention Of Records
When it comes to retaining records, all businesses, be it registered or unregistered, are required to maintain records such as profit and loss records, balance sheets, inventory records, and all the necessary accounting records.
Also, note that businesses might be required to make changes to their financial management practices and keep their records and accounting books. All these are very important to know while learning about the VAT Laws In The UAE. You may also need to change your accountants and your tax advisers.
#5: Difference between Mandatory Registration Limit And Voluntary Registration Limit
If your business has a turnover of more than 375,000 Dirhams, you need to register for VAT mandatorily. In contrast, if your business has a turnover of fewer than 187,500 Dirhams, then you can opt for voluntary registration.
There you go, those were the five key factors you need to pay attention to in regards to VAT Laws In The UAE.
I hope you have found this article informative; if you have further queries or comments, you can post them down in the comment section below. We will try to reply to each one of them.