Beginning of the Tax Regime in the UAE
Before the announcement of Tax Procedures, there has been extensive researches and studies on the part of the government, making sure that everything will be relatively easy for everyone in the country.
Since the landmark Federal Law Number 7 of 2017 regarding Tax Procedures was issued by His Highness Sheikh Khalifa Bin Zayed Al Nahyan last June of this year, it laid down the foundations of the tax systems that would soon be executed in the United Arab Emirates (UAE) starting 1 January 2018. This will mark the UAE and Saudi Arabia as the first countries that are part of the Gulf Cooperation Council (GCC) that will implement VAT.
Coming mid of September, the start of the registration will happen for all firms that fall under the minimum annual income of AED 375,000. There are about 350,000 businesses that are expected to register under this new regime.
The registration will be done on Federal Tax Authority (FTA)’s website. The well-established and financially sound companies will be first-in-line in the registration along with those firms that are producing and importing products that will have the excise tax on—tobacco, energy drinks, and carbonated drinks.
Pay Your Tax! Online VAT Registration Facility by Federal Tax Authority
There have been a lot of questions arising from the business world regarding the implementation of the value-added tax (VAT), and the Ministry of Finance’s website has been updating its VAT page for recent information to satisfy the enquiries of UAE residents.
The federal tax authority has launched an online system on an official website that will be providing a facility for the businesses who exceed mandatory and voluntary VAT registration thresholds.
Business means it’s basically involved and ongoing in any form of the following such as industrial, commercial, professional, trade, etc.
VAT returns must be filed by the business within 28 days from the end of the tax period (according to the procedures identified clearly in the VAT legislation) with the FTA on a regular basis—this is still depending on the FTA’s decision; it can be quarterly or for a shorter period. There will be e-services online that will be provided by the government and tax returns shall be filed there. Also, a business can choose to register for VAT regardless if they don’t meet the minimum annual income but they go beyond the voluntary base that is AED 187,500. On the other hand, if the minimum amount for the voluntary registration is surpassed by a business’ expenses, they can register voluntarily as well. New companies (which are beginning to develop and without turnovers) are encouraged in this kind of opportunity, enabling them to register for VAT.
a) Mandatory Registration
Any business is required to register if they fall into the following classifications:
- For over the 12-month period, the taxable supplies of the business go beyond the mandatory registration threshold, or
- The business expects to make taxable supplies in the next 30 days that will have a value that is more than the mandatory registration threshold, or
- The amount of mandatory registration threshold is AED 375,000.
b) Voluntary Registration
Any business that doesn’t meet the mandatory registration criteria and falls into the following classifications may opt for a voluntary registration:
- In the previous 12-month period, their taxable supplies or taxable expenditures are worth more than the voluntary registration threshold, or
- The business expects for their taxable supplies or taxable expenditure for the next 30 days to be worth more than the voluntary registration threshold, or
- The amount for the voluntary registration threshold is AED 187,500.
What are Taxable supplies?
To understand further if you are obligated to be registered, the definition is as follows. If there is a supply of goods or services that are done in the UAE and have the possibility of being taxed at either 5% or 0%, this is a taxable supply. Even imports are taken into consideration as taxable supplies if they are made in the UAE.
How Can the Tax System Help in Boosting the UAE Economy?
There have been some declines in oil revenues for over the last three years, and it has been a trouble for every country. In executing VAT, it is expected that the economy of the UAE will be strengthened even more, making it one of the advanced competitors in the world.
The budget that will be created from VAT will aid the government in giving better services and strongly support the country’s healthcare, education, and infrastructure projects, helping those aspects of the country to develop.
Admittedly, having a tax is a notion that is new to everyone in the UAE, since the country has been free of tax for years. It could be confusing and difficult to grasp, hence, FAR – Farhat Office & Co. offers its helping hand to you to get prepared for VAT, from registration to filing tax returns, we are offering VAT registration, VAT consultancy, and VAT accounting services in UAE.
Contact us for a free assessment for your business.