All member states of the GCC will have to implement the Value Added Tax (VAT) from the 1st of January, 2018. You wouldn’t want to wait a long time for you to register for it because the numbers of days are getting shorter. There is no going around this, there is going to be some major impact when this comes into effect. This will be felt by the businesses that are going to be affected by this. As a business owner, you might be flooded with questions regarding this new act. Here are some of the questions that you might ponder about:
Will my business need to register?
What is the impact of my business?
How is compliance achieved?
Will there be an effect on the cash flow?
How should I plan to manage the impact?
Who is responsible for the filing?
Does my team have the training?
What are the IT changes required?
What is Vat and How Does it Work?
It is a tax on consumer expenditure whereby the businesses are essentially collecting taxes for the govt. The business owner collects and submits the tax at each stage of the process until the final tax levied on the customer.
When a business has been registered under the scheme, it must do these three things:
- Charge VAT at 5% on the goods and services it sells to the customers and other businesses
- Pay goods and services it buys from other businesses
- Must file VAT return every quarter to the Federal Tax Authority
Who needs to register for VAT?
If the annual turnover is more than 375,000 AED, it is mandatory.
If the annual turnover is between 187,000 and 375,000 AED, it is optional.
If the Annual turnover is less than 187,000 then it is not mandatory
Documents needed for VAT registration
It is quite important to have all these documents with you prior to registration
- Trade License
- Emirates ID
- Certificate of Incorporation
- Bank Account Details
- Articles of Association
- Description of Business Activities
- Project Future Turnover
- Last 12 Months Turnover
- Value of Imports and Exports
- Customs Authority Registration
- GCC Supplies
Things that are Exempt from VAT
- Financial Services clarified in the VAT Legislation
- Residential Properties
- Bare Land
- Local Passenger Transport
What does the VAT mean for the individual?
As it is a general consumption tax, there will be an increase in the cost of living for the individual. Although this is subjective as it is dependent on the lifestyle of the individual. If the individual is spending on the things that are exempt from the VAT, then there won’t be any significant difference.
What does the VAT mean for businesses?
All businesses will be required to document their business income and costs, and the associated VAT charges. Those businesses that fall within the minimum threshold will have to register with VAT, while those which do not will need to maintain the proper records anyway, in case the ministry decides to include you in the VAT.
Who Can Help You?
Depending upon the skills of your resources – your employees, you can try and od the entire process of your own, or you can get the help of consultants who will get you through the entire process giving you transparency and clarity.