Impact of VAT in UAE [1 Year and Counting]

UAE recently celebrated its first VAT anniversary. The country, known for its rich oil reserves and a booming global tourist hub, had introduced VAT to open up a new source of non-oil revenue for offering efficient and much improved public services, including medical facilities, good roads, transportation facilities, public schools, parks, waste control, and more.

The VAT in UAE was introduced on Jan 1, 2018. More than a year later, tax experts acknowledge the role of FDA (Federal Tax Authority) and UAE public for the successful implementation. Reportedly, the 5 percent VAT was the first of any form of TAX introduced in the Emirates.

The Role of FTA in VAT UAE Success

FTA was at the realm of all VAT related decisions in UAE. Their principle role includes key functions like :

  • Clearing all impending ambiguities (if any).
  • Issuing timely circulars and guides on VAT related provisions.
  • Ensuring compliance from UAE traders, business owners and the public at large.

The UAE VAT rates are one of the lowest in the world right now. VAT UAE provisions mandate VAT registration for all natural and legal UAE person with taxable business supplies exceeding Dh375,000 ($100,000) during the previous 12 months.

In case the total taxable supplies have not exceeded Dh375,000 ($100,000) but expected to cross the threshold within 30 days of the succeeding year, VAT registration must be done.

While registration is key for a robust VAT, filing VAT returns are also equally important. VAT UAE norms mandate large businesses to file monthly returns. Other business can file quarterly returns based on revenues.

FTA must be applauded for ensuring maximum registration and easing compliance burden with timely guides. This ease of process coupled with companies embracing VAT readily by restructuring business processes and systems have made the transition period smooth and frictionless. FA is yet to release tax revenue figures but the recent increment in federal budget spending surely hint towards better days ahead.

The role of FTA is particularly more prominent considering the fact that VAT UAE was in itself the first among any form of tax introduced in the emirates. However, UAE and FTA exempt precious metals such as gold, silver, and platinum as well as sectors such as healthcare, education, and transport from the VAT ambit.

The Tourist VAT Refund Scheme

The VAT Tourist Refund Scheme has now been completely put into place. The first phase was launched on November 18. The second and final phase was introduced on December 16. The achene now facilitates international tourists in UAE to make timely VAT refund claims against purchases made by them on the UAE soil.

Tourists visiting UAE can make claims while leaving the country from any of the following international airports – Dubai, Abu Dhabi, Sharjah, Al Ain International Airport, Al Maktoum International Airport and Ras Al Khaimah International Airport.

In addition to this, tourists can also claim refunds via two ­sea ports – Zayed Port in Abu Dhabi and Port Rashid in Dubai; and four land ports – Al Ghuwaifat Border Post in Abu Dhabi, Hili Border Port and Al Madeef Border Crossing in Al Ain and Dubai’s Hatta Border Exit. Refunds are transferred within 90 days of the claim.

The Projections

The first UAE VAT accrues are projected to touch the Dh12 billion mark in 2018. For 2019, the prediction is a whopping Dh20 billion. Amidst years of the dependence of fledgling crude prices as the primary revenue source, the VAT UAE not only opens new diverse revenue sources but also shows the way ahead for other GSS states and oil producing nations.

The Audits

As the new year slowly sets in, businesses in UAE are gearing up for VAT Audits. The FTA Audits will ensure that businesses stick to fair book-keeping. FTA Audits will be carried out over a period of five working days starting with the day following the particular emails release date.

The Audit periods will include two phases for January 1, 2018-to-April 30, 2018 and May 1, 2018-to-July 31, 2018 tax periods. Businesses must ensure that their expense claims are backed by legitimate and appropriate documents. Last but not least, businesses must also ensure robust book-keeping with timely payment of due tax.

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