Value Added Tax (or VAT) is an indirect tax or consumption tax. VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government. A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.
A few salient points for reference:
VAT implementation set to begin w.e.f January 01, 2018.
The standard rate of tax will be 5%.
Certain items will be exempt from VAT while certain items will be zero rated.
Reverse charge mechanism to apply on import of goods and services.
Entities having turnover in excess of AED 375,000 p.a to mandatorily register for VAT.
It is mandatory for every taxable person to maintain books of accounts under UAE VAT law.
Returns have to be filed on a monthly/quarterly basis within 28 days after the end of the month/quarter.
Emirate wise reporting of sales/services.
Tax invoices (in prescribed format) to replace the existing invoices.
Existing accounting software to be suitably modified to account for VAT.
Scope of work: Implementation
Guidance with respect to accounting for VAT related transactions
Guidance with respect to taking credit and adjustment of input VAT
Guidance with respect to VAT groups (for related parties)
Assistance with monthly filing of VAT returns.
Verification of VAT related accounting transactions on a monthly basis.
Verification of VAT input credit claims
Ensuring that proper books of accounts and VAT related documents are maintained.
Periodic guidance related to changes in VAT laws, rules and regulations