TAX POLICY IN UAE
“Death, taxes and childbirth! There’s never any convenient time for any of them.That’s why it’s of essesnce to be abreast of the realities they hold”
Many people do not understand the realities of UAE TAX POLICY nor the reason behind the concept. In every civilized society, the word “Tax” is such a small, unassuming word – with the power to strike fear into the hearts of everyone who hears it. Tax is almost inevitable in any society.
The UAE and Saudi Arabia is set to implement a 5 per cent VAT from January 1, with the other four Arabian Gulf countries expected to follow suit in 2018. With the roll-out of UAE tax policy (VAT) , some businesses and residents are growing increasing concerns about how the levy will affect their incomes and their living standard.
WHAT IS UAE TAX POLICY AND HOW DOES VAT WORK?
VAT means Value added Tax. A tax imposed on the import and supply of Goods and Services at each stage of production and distribution, including the Deemed Supply. This is a consumption tax imposed on a product at each stage of production, before the final sale. Take, for instance a Phone manufacturer/farmer: the company/farmer is taxed on all the supplies it purchased to make and produce the phone before it reaches the shelf. Then you, the customer pays the VAT (the tax the company/farmer had been liable for during the production process) as a percentage of the total price. VAT is not usually an extra or add-on to the sale price.
Normal requirements under the UAE VAT Policy which companies must comply with:
- At the time of purchase of goods or availing of services – Ensure that in the case of taxable items whether tax has been properly charged (input tax)by the supplier and details given in the invoices.
- At the time of sale or provision of services – Apply the rate on the sale value and reduce the amount of input tax to arrive at the amount to be paid.
- Make the payment of tax computed and due within stipulated date to Govt.
- Filing the VAT returns to the Government authorities by providing the relevant information requested by the Government, within the stipulated period.
- Maintain proper stock, invoices, accounts, VAT returns, and other relevant records to justify the tax paid at the time of purchase.
How can our VAT consultancy Department assist you?
Many businesses are under-prepared and I believe many underestimate the amount of work that needs to be done. VAT is a tax that affects all businesses. There are also some strategic decisions that need to be made in accounting, documentation, purchase, sales etc. Dealing with all this, especially the changes to the IT systems, takes time and the clock is ticking.
If businesses do not leave time to prepare, they risk not being able to comply with the law from day one and may find themselves facing problems with suppliers, customers and unnecessary costs.