Effective from 1 January, 2018, the United Arab Emirates (UAE) will start applying the value-added tax to most goods and services.
It is a big turning point for the country that has long lived without tax. Introduction of the VAT which will be fixed at 5 % rate, will allow the country to diversify its revenue streams and reduce its oil dependance.
THE COMPANIES CONCERNED
The new law will concern first and foremost companies with a turnover superior to 375 000 AED. These enterprises will be obliged to register for VAT online. Furthermore, enterprises with a turnover situated between 187 000 AED and 375 000 AED will be able to apply for a voluntary registration. Finally, in order to enable start-ups with no turnover to register for VAT, companies whose expenses exceed the voluntary registration threshold (187 500 AED) may also register.
THE GOODS AND SERVICES CONCERNED
VAT will be applied to most goods and services at a standard rate of 5 %. Nevertheless, some sectors will benefit from a reduced tax rate of 0 %, for example, exports of goods and services to the countries outside of the Gulf Cooperation Council (GCC), international transportation, certain education and healthcare services and their relevant goods, certain investment grade precious metals, etc.* Besides, some categories of supplies will be exempt from VAT: some financial services, residential properties, bare land, and local passenger transport.
THE OBLIGATIONS FOR THE BUSINESSES
Each VAT registered business will receive a VAT number which will have to figure on all invoices. Invoices will also have to mention the value of supplies subject to VAT as well as the VAT rate. Each trimester, the company will have to submit a tax return. It must be submitted no later than on the 28th day after the end the tax period, and must contain specific mandatory information such as the value of the VAT charged, the value of recoverable VAT, the payable VAT for the tax period, etc.* In addition, registered for VAT or not, the company will need to keep records of its operations so that the authorities can audit its transactions and verify whether the company must register for VAT or not.
The VAT implementation will be a challenge for the businesses that will need to comply with the new system and new obligations. ASD Group has recently opened an office in Dubai in order to meet the growing demand of our clients in the Middle-East. Do not hesitate to contact us for any question regarding your development in the region.
* Non-exhaustive list