VAT, as a general consumption tax, will apply to the majority of transactions in goods and services. A limited number of reliefs may be granted.
As a result, the cost of living is likely to increase slightly, but this will vary depending on an individual’s lifestyle and spending behaviour. If an individual spends mainly on those things which are relieved from VAT, he is unlikely to see any significant increase.
The government will include rules that require businesses to be clear about how much VAT an individual is required to pay for each transaction. Based on this information, individuals can decide whether to buy something.
Implication of VAT on businesses
Businesses will be responsible for carefully documenting their business income, costs and associated VAT charges. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case the ministry needs to establish whether they should be registered. The FTA does have the power to conduct audits on taxable persons and subsequently impose penal measures on those that are not compliant with the law.
A business must register if the total value of their taxable supplies made within the UAE exceeds the mandatory registration threshold over the previous 12 month period, or they anticipate making taxable supplies with a value exceeding the mandatory registration threshold in the next 30 days.
The mandatory registration threshold is AED 375,000.
A business may also apply to register if they do not meet the mandatory registration criteria and the total value of their taxable supplies or taxable expenditure in the previous 12 months exceeds the voluntary registration threshold, or they anticipate that the total value of their taxable supplies or taxable expenditure will exceed the voluntary registration threshold in the next 30 days.
The voluntary registration threshold is AED 187,500.
For the purposes of understanding whether a registration obligation exists, a taxable supply refers to a supply of goods or services, made by a business in the U.A.E., that may be taxed at a rate of either 5%, or 0%. Imports are also taken into consideration for this purpose, when a supply of such goods or services would be taxable when made within the U.A.E.
VAT registration require some official documents. Before submission of an application some important documents must be completed. Businesses will get VAT registration in the form of a VAT certificate, with the help of official documents. Every VAT certificate will have a specific identification number. The identification number will be essential for all the tasks to be carried out for VAT in UAE.
The process for VAT registration and fee submission will be done online. Following documents are required for the registration of VAT in UAE.
1. Copy of Trade License
2. Passport copy of the owner/partners who owns the license
3. Copy of Emirates ID of the owner/partners who owns the license
4. Memorandum of Association (MOA)
5. Contact Details of company (complete address & P.O Box)
6. Concerned person contact details
7. Email of the concerned person
8. Copy of all bank accounts and statements including IBAN
9. Owner has any other entities?
10. Income statement for the last 12 months
11. Expected revenue and expense for the next 30 days after VAT implementation
12. Are they exporting, or importing?
13. Are they dealing with any custom department? If yes. What is the custom code?
14. Are they doing business with any other G.C.C. country? (Country name)
15. If these are representing more than one entity, whether they want one tax group number for allof the entities, or separate tax numbers for each entity.
16.Experience of business (Owners or directors involved in any previous businesses before for the last 5 years?)
The submission of the documents will be done when you have registered online.
After online VAT registration and fees payments, you will be allowed to submit the documents. After the verification of the documents and completion of the process, a VAT certificate will be provided.
VAT will be charged at 0% in respect of the following main categories of supplies:
Exports of goods and services to outside the GCC States that implement VAT
International transportation, and related supplies
Supplies of certain sea, air and land means of transportation (such as aircrafts and ships)
Certain investment grade precious metals (e.g. gold, silver, of 99% purity)
Newly constructed residential properties, that are supplied for the first time within 3 years of their construction
Supply of certain education services, and supply of relevant goods and services
Supply of certain Healthcare services, and supply of relevant goods and services
The following categories of supplies will be exempt from VAT:
the supply of some financial services
Residential properties
Bare land
Local passenger transport
Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods/services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.
VAT-registered businesses generally:
• must charge VAT on taxable goods or services they supply
• may reclaim any VAT they have paid on business-related goods or services
• keep a range of business records which will allow the government to check that they have got things right.
VAT-registered businesses must report the amount of VAT they have charged and the amount of VAT they have paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be done online.
If they have charged more VAT than they have paid, they have to pay the difference to the government. If they have paid more VAT than they have charged, they can reclaim the difference.
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