On 1st January, 2018, UAE government introduced Value Added Tax (VAT). The introduction of new tax has made a buzz among UAE residents. People are curious to know how this would impact their budget, which businessmen are eligible to register for it, what requirements need to be fulfilled, how to register and several other questions. To deal with all questions and clear all the doubts, there are several consultancies and companies in Dubai which offer VAT Consultation. To have a general understanding about VAT and criteria for registering it, some guide points are provided here. So keep reading on and know about it more.
What is VAT?
VAT is an acronym for Value Added Tax. It is a tax on consumption or use of goods and services levied at every stage (from production to sale). It is an indirect form of tax bore by end customer and collected by businessmen on the behalf of government. It is imposed with the intention of making new source of income for government in order to provide high quality public services and reducing its dependence on oil for revenue collection.
How does VAT affect individuals and businessmen?
For individuals: VAT is applicable to almost all transactions made for goods and services. This will comparatively raise the cost of living and the effect will vary according to the individual’s lifestyle and expenditure. The residents, who use mainly those products and services which are exempt from this or have 0% rate, will be least affected by this tax.
For businessmen: All businessmen have to carefully maintain required documents regarding their income, costs and respective tax charges. Registered businessmen need to collect VAT from all customers according to guidelines and need to pay VAT for the goods and services (they have bought and used) to their suppliers. The difference in amount will be reclaimed by the government.
Criteria to Register for VAT
- According to guidelines, any business receiving yearly turnover of at least AED 375,000 must be registered under VAT. It is mandatory to prepare and file VAT returns and maintain documentation of tax returns for at least 5 years.
- Those businesses also need to register which anticipate that their total value of supplies will exceed the threshold of AED 375,000 in next 30 days.
- However, registering for this tax is optional for businessmen who receive turnover of at least AED 187,500 per annum.
- The businesses which do not have a residence place in UAE have to register under VAT irrespective of the threshold on a mandatory basis.
- The businesses with value of supplies below than AED 187,500 are not allowed to register under this tax.
This little guide about VAT is sufficient to make yourself clear who are allowed to register under VAT and who are not and how is it affecting people’s lives. However, there are many aspects to know in detail about VAT. For that, VAT consultation from professionals is the best solution, as consultants have complete knowledge and are well versed in the whole process.
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