VAT in UAE & GCC

Value-Added Tax or VAT is a tax on the consumption or use of goods and services levied at the point of sale. VAT is a form of indirect tax and is used in more than 180 countries around the world.

The UAE is considering levying Value Added Tax (VAT) from January 2018. The rate of VAT will be 5 per cent.VAT will provide the UAE with a new source of income which will be continued to be utilised to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Implication of VAT on individuals

VAT, as a general consumption tax, will apply to the majority of transactions in goods and services. A limited number of exemptions 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. 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.

Corporate Tax

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business. Corporate tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions UAE Corporate Tax will apply to all UAE businesses, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation. Foreign entities and individuals will be subject to Corporate Tax only if they conduct a trade or business in the UAE in an ongoing or regular manner. UAE Corporate Tax will apply equally to all categories of profits and other (net) income reported in the financial statements prepared in accordance with internationally acceptable accounting standards.

VAT in GCC

The UAE needs to coordinate VAT implementation with other GCC countries because she is connected with them through 'The Economic Agreement between the GCC States' and 'The GCC Customs Union'. The GCC has always worked together in designing and implementing new public policies as such collaborative approach is best for the collective development of the region.

VAT Compliant Accounting Software

We offer VAT Accounting software (Accountrak) with inventory management. Other inbuilt modules are accounts receivable , accounts payable and payroll with more than 50 customized reports. Automatic calculation of VAT returns as per FTA rules. This software satisfies all functional requirements as per Federal Tax Authority(FTA) guidelines.

Some of the key features of this accounting software are:

• Management of income and expenses
• Invoicing customers with professional, and customizable invoices
• Accurate reconciliation of bank statements with accounts
• Automatic calculation and generation of VAT returns
• Auto generation of FTA audit file