Important Things You Need to Know About VAT Consultancy

Estimated Time to Read: 4 minutes

There’s no denying that since it’s implemented in Dubai, many businesses still find VAT (Value added Tax) quite complex and confusing due to the comprehensiveness of the tax procedure. Given that, registering with VAT is essential for all industries other than those are exempted, it may lead to a huge penalty if neglected. So, if you’ve not yet registered your company, it’s vital for you to speak to a VAT consultancy Dubai for needful evaluation and support. 

What is VAT?

It’s a form of consumption tax and levied on a host of products and services. Designed on much better concept than commercial sales tax, VAT comes under indirect taxes and at this time it’s been adopted in 180 + countries across the globe. The multi-stage tax applies to each phase of the supply chain while a credit of input tax can granted as refundable, if applicable. While the tax is finally borne by end users, in this process, businesses perform the role as the tax collectors on the government’s behalf and pay it to tax authorities.

Why Should Hire a VAT consultancy?

On hiring a VAT consultancy in Dubai, they’ll assess the type of your business, its yearly turnover and accordingly suggest you whether you need to be registered with VAT or not. If yes, they’ll do everything for you from having registration to the filing of return from time to time and take care of your refund, when applicable.

Why is VAT implemented?

Even though for UAE government, the fuel industry has been a great source of revenue, however, with its erratic market rate as well as deflation, the country is now looking for alternative source of revenue with a view to keeping providing high-quality amenities and services to the nation. Thus, the whole idea of implementing VAT in Dubai is to fetch a consistent source of revenue which has high potential to contribute to the development of the country and minimize its absolute dependence on petroleum resources.

On which sectors VAT is applicable?

The VAT has been levied on almost each major to minor industries while items like food, transport, education, health, and some other products and services are either exempted or zero-rated under the tax policy.

How zero-rated items differ from exempt supplies?

While many businesses consider that there’s no difference among zero-rated produces and exempted items, it’s not like that. Carefully note that if your product comes under zero-rated goods, still you’re required to obtain registration and pay taxes on all your purchase bills i.e. input taxes; however, you can get a refund of the entire money afterword. On the contrary, for businesses that are exempted don’t have the option to get a refund of VAT on their purchases.

Does all business need to register with VAT?

This is one of the most frequently asked questions about VAT in UAE. While all businesses don’t require registering them for VAT, it’s mandatory for businesspersons whose annual business turnover cross a specific amount. From that viewpoint, implementation of VAT can be beneficial especially for small enterprises since unless having that turnover, they don’t need obtaining registration which can save their time from huge paperwork.

What will be the taxed amount?

This depends on your amount of revenue earning. The VAT is levied @ 5%, which will be applicable for enterprises earning more than AED 375,000/ year. This doesn’t apply on exempted products and services.

How can you register with VAT?

To avoid all kinds of complications, ideally, you should get in touch with a reputable VAT consultancy in Dubai. For your further information, companies that are found unregistered even after crossing that turnover amount may face a penalty as high as AED 20,000 for negligence.

What is a VAT refund? Who can claim for a refund? It’s vital for all registered companies to file a VAT return within the due date (4 times a year/on quarterly basis) producing the detail particulars of purchase and sales bills, the amount of tax paid toward input tax ( for buying raw materials) and tax received from output VAT against sales bill. A VAT consultancy in Dubai will do the needful to documenting tax invoices on sales and buying points and accordingly derive the total amount of input and output tax. On balancing if the input VAT is found higher than your output VAT, then whatever the extra money you’ve paid will be refunded by tax authorities. Equally, if the input tax is found lesser that output tax amount, then the remaining part should be treated as payable. A consultant can guide you better in this regard.

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