How VAT affect the companies in UAE ?
The UAE government has announced to introduce Value added Tax (VAT) from January 1,2018. The VAT scheme is expected to impose 5% of tax on most goods and services.
The VAT will be applicable on most goods and services that are bought and sold, Education, healthcare and basic food items will be an exception. Consumers will primarily shoulder the added cost and businesses will collect and report the associated VAT charges, together with their revenues and expenditures. In essence, businesses will act as tax collectors for the government.
The Value Added Tax (VAT) programme is only applicable to businesses that meet a particular minimum annual revenue. Small businesses that do not meet this minimum annual turnover will not be required to register for VAT system, as well as businesses providing goods and services that are not covered by the added tax.
VAT-registered businesses are mandated to document all their financial transactions and maintain accurate and updated records. A VAT-registered business should:
Apply VAT on all taxable goods and services it provides
Update and maintain its financial records, which will be checked by the government to ensure full compliance and accuracy
Reclaim VAT charges it spent on business-related goods and services, if applicable
Report VAT charges it made and paid to the government
Businesses that think they should be excluded from VAT are advised to document and maintain their financial transactions to enable the government to determine if they should be registered or not.
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