Introduction
The GCC nations have announced introduction of VAT from the next year and preparation for the same is in full swing. Kingdom of Saudi Arabia already published the treaty in their official gazette earlier this month and is all set to introduce it with effect from 1 January, 2018. The view of rulers of the United Arab Emirates (UAE) is not any different and the UAE is also introducing VAT from next year. This article shall answer some major questions about the recent development for introduction of VAT in the UAE.
Where?
All the GCC nations are bound to introduce the VAT by 2018 for the treaty signed by them. UAE is introducing VAT in all of its seven emirates from 1 January, 2018. The ministry of finance in the UAE is expected to reveal the VAT rules for companies incorporated in free zone in a couple of weeks. Offshore transactions will also be subject to VAT on a reverse charge basis.
How?
VAT is an indirect tax and accordingly the burden of payment will be on end consumer. The business registered in the UAE will be required to register themselves with the authorities for collection of VAT if their turnover exceeds the specified limit which is AED 375,000. The businesses that have a turnover of AED 187,500 have the option to voluntarily register them for VAT.
The registered business can also avail the VAT credit on the VAT paid by them and get the benefit of input credit on the VAT invoices issued by them.
What you need to do?
If you are a business registered in UAE, ensure you have proper books of accounts and financial records in place. Also, check if your turnover exceeds the specified limit and register for VAT with the regulatory authorities. The authorities are expected to open the registration in a couple of months. Also, ensure that your staff is competent enough to address the new challenges bought in by introduction of this new law.
Please feel free to contact us at [email protected] for making your company 100% compliant with the VAT regulation.
