The introduction of VAT in the UAE on 1 January 2018
As of January 1, 2018, UAE will begin to apply VAT to most goods and services. This is a big turning point for the country that has long lived without taxes. The introduction of VAT at a standard rate of 5% will allow the country to diversify its revenue streams and reduce its dependence on oil.
THE COMPANIES CONCERNED
The new law applies primarily to companies with an annual turnover exceeding 375,000 AED. These companies will have to register for VAT online. Companies with a turnover between AED 187,500 and AED 375,000 may also apply for registration on a voluntary basis. Finally, in order to allow start-ups with no turnover to register for VAT, companies whose expenditure subject to VAT exceeds the threshold of voluntary registration (AED 187,500), 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 tax rate reduced to 0%, for example, the export of goods and services to countries outside the Gulf Cooperation Council (GCC), international transport, certain products and services, education and health services, certain precious metals, etc. * Other sectors will be exempt from VAT: certain tax services, residential properties, vacant land and local passenger transport.
OBLIGATIONS FOR COMPANIES
Each company registered for VAT, will obtain a VAT number, which it will have to include on all its invoices. They will also have to mention the amount on which the VAT applies as well as its rate. Companies will have to report each quarter. This declaration of turnover must be submitted no later than the 28th day after the end of the tax period, and must contain the mandatory information such as the amount of VAT invoiced, the amount of VAT recoverable, VAT payable for the tax period and other information *. In addition, liable for VAT or not, the company must keep records of its operations so that the authorities can audit their transactions and check whether the company must register for VAT or not.
The introduction of VAT will be a challenge for companies that will have to comply with the new system and new obligations. Do not hesitate to contact us for any questions regarding your development in the region.