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VAT in UAE
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Value Added Tax in UAE
It has also been made mandatory in the UAE region and thus, all businesses in the area need to submit their respective application to register for VAT before the impending deadline. The rate of VAT will be levied at 5% with an idea that the VAT will facilitate a new income source for the UAE that will further be utilized and help in providing eminent public services.
With the implementation of VAT in the UAE market, things are definitely expected to change for the good. This shall provide the UAE with a new income source, which will be continued to be utilized to provide high-quality public services. It will also help the government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue. Just as is the case with any taxation, in case of VAT as well, the benefit will ultimately get back to the people of the region in terms of enhanced growth of the nation and increased opportunities. And though, there have been several speculations on the expenses being increased for people due to inflation, experts believe that VAT will prove to be beneficial in the long run.
Value Added Tax is charged at the flat rate of 5% in the United Arab Emirates on the sale of goods and/or services. However, there are some goods/services, known as exempt supplies, which are exempt from the levy of Value Added Tax. There is also another category of goods/services, known as zero-rated supplies, on which VAT has to be levied, but at the rate of 0%. There is no Value Added Tax payable on the sale of zero-rated supplies, but accounting requirements stipulate that they be recorded correctly.
For companies that have an annual turnover of AED 150 million or more, the Standard Tax Period is usually of one month duration. The outstanding VAT amount payable must be paid within 28 days of the end date of the Standard Tax Period and the VAT return filed accordingly. Submitting an incorrect VAT return entails a penalty of AED 3,000 for the first offence and AED 5,000 for every subsequent offence, so it is best to have an experienced VAT specialist file your tax returns.