Vat in UAE and FAQ

We, at Bens CA, ensure our valued clients/business partners remain on top of changing business dynamics in UAE especially on VAT. In this edition, we would like to share the latest information our VAT experts in UAE are getting from MOF/FTA and other professional platforms. To make it easy and relevant, the updates are in FAQ format. 

Can I register my business with the Federal Tax Authority (FTA) for VAT?

The registration is already started, please read our other article for the complete procedure on registration. 

Who will look after my tax matters i.e. tax assessment, calculations, and a tax return?

You can appoint a Tax consultant/Tax Agent, he/she can be any person who fulfills the criteria as defined by FTA. 

Who is a tax agent?

Tax Agent is explained as any Person registered with the Authority in the Register, who is appointed on behalf of another person to represent him before the Authority and assist him in the fulfillment of his Tax obligations. Basically, Tax Agents are people who can represent taxpayers and interact with the Federal Tax Authority (FTA) directly. 

What should I do now!

1. Assess the implications of VAT on your business by hiring an expert, the experts can be auditors/professional accountants or CPAs.
2. Evaluate the ERP in use whether it is ready to account for VAT transactions e.g. input tax, output tax, refunds, and claims. You can do it in-house or hire a professional firm for advice.
3. Training of finance & accounting resources, especially the AR/AP and GL accountants.
4. Start discussing with professional firms, a trial run is always good before Jan 2018. 

I am a small business, I think I will not be concerned with VAT?

It is a bit of tricky statement if your business revenue is less than or equal to AED 187,500, still, you will be impacted since you have to pay input tax, but you cannot claim the same. If the revenue is more than or equal to AED 375,000, it is mandatory to register irrespective of which business you are in. A simple coffee shop around the corner maybe a VAT tax filer. 

What is input tax, output tax, tax refunds/claims, and tax liability?

An input tax means, the tax you will pay to your suppliers, while the output tax means, the tax you will charge to your customers. A claim/refund is the amount of input tax minus output tax, if the amount is positive, it is your refund/claim, however, if the amount is negative, it is your tax liability. 

I am in the Education and Health sector, so I am relaxed?

There is no absolute answer yet, however with the introduction of detail VAT procedures/manuals by authorities, your tax advisor can advise you on it. 

I am in the free zone, so I think I am exempt from VAT?

This is not as clear as we speak today. Authorities still have to release more details. However, most probably the gated free zones (like Jebel Ali) will be considered as Off-Shore while the non-gated free zones (like DMCC) will be considered as the mainland and will be taxed.

I am a trading concern, importing and exporting only and not selling within UAE?

Here complexity comes:

1. if you are importing without touching the supplies in UAE/GCC markets and exporting to non-GCC markets, it is quite possible that you should be relaxed.
2. if you are importing and touching the suppliers in UAE/GCC markets, and you are selling GCC markets, you may be taxed.
3. Finally, if you are importing and not touching the material in UAE but selling in GCC markets, still you might be under tax umbrella.
4. More clarity yet to come. 

I render Services only, I think Services are out of VAT jurisdictions?

We believe no, as per the definitions in the law, here is an extract from the law: Taxable Supply: A supply of Goods or Services for a Consideration by a Person conducting Business in the State (UAE/GCC), and does not include Exempt Supply. 

What Zero-Rated and Exempt supplies mean?

Zero-rated supplies are charged with 0% of VAT, and a registered taxpayer (business) can claim the input tax from authorities, however, if supplies come under the exempt category, then you may not be able to claim the input tax irrespective of your registration, hence it will be a cost to the business. 

What should I do with my clients and running contracts?

It is important to start educating your clients about possible implications including the revision of prices/contract value. We also suggest, engaging your business partners (Suppliers/Customers) and discuss the impacts, who will bear what, should that be passed to customer/consumers, should it be a business cost. If you are in the business of basic necessities (mostly groceries), then engage with authorities for possible consumer price adjustments. 

I am mostly conducting business within GCC; I think I should be well prepared?

Absolutely you are right, the complexity part of the UAE VAT resides mainly in Inter-GCC business, there might also be complications where UAE/GCC markets do not have a double taxation treaty with other countries in which/from where you transact business. 

I don't know what impact VAT will have on my business?

The answer can be yes and no impact, however from a business point of view, we highly recommend, the following elements should be kept in mind:

1. Assess the possible impact on your margins due to price adjustments (due to 5% VAT).
2. Assess the impacts on your long terms contracts.
3. Assess the possible impact on your products/services demand, in high volume businesses; it will be good to assess the possible impact on the entire supply chain. 

We are sure the above updates in the simple form will help you. 

Contact us for further information and advice on VAT. We also provide Audit in Dubai, Bookkeeping services in Dubai and CFO services; we are registered across all free zones, banks, DIFC and RERA.