VAT Implementation in UAE

The government has imposed VAT in GCC countries as part of the government’s drive to diversify and generate more revenue in the wake of the significant drop in oil prices. Companies incorporate VAT, which is an indirect tax, into their business processes. HLB HAMT’s VAT execution team works together to assist firms in Dubai.

The United Arab Emirates implemented VAT on January 1, 2018. The basic VAT rate is 5%, and it applies to the majority of products and services. However, some commodities and services are entitled to a 0% rate or a VAT exemption.

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    The zero-percent VAT rate can be attributed to products and services supplied outside of the VAT-implementing Gulf Cooperation Council (GCC) member states, international transportation, crude oil/natural gas supply, maiden delivery of residential real estate, and some particular categories such as education and healthcare. The statutory VAT registration level for UAE-based firms is 375,000 UAE dirhams (AED), whereas the optional registration threshold is 187,500 AED. Non-resident enterprises making supplies on which UAE VAT is supposed to be imposed are exempt from the registration requirement.

    HLB HAMT understands that businesses require assistance with VAT implementation in the UAE in order to comply with the UAE VAT law and encourage the development of a viable assessment strategy. The following is the vibrant VAT implementation methodology:

    • The normal tax of 5% will be applied to the provision of goods and services in the UAE.
    • Local transportation, financial services, healthcare, and exports beyond the GCC will all be zero-rated or VAT-free in the UAE.
    • The VAT experts should have a strategy in place to create the finest VAT implementation procedure for your company. HLB HAMT gives clear guidance on VAT methods in the UAE financial model.
    • Based on the volume of the business, the influence of VAT on inventory, costs, profitability, and working capital of the firm can be significant. Furthermore, by conforming to UAE VAT requirements, it effectively set a baseline for the company’s operations. A thorough examination of present accounting systems, as well as the proper classification of VAT friendly chart of accounts, is required.
    • Under UAE VAT legislation, the IT department requires help with VAT invoicing, and suitable training for accounts and other sales-related matters should be provided. Incorporating the new UAE VAT standards into bookkeeping and other administrative processes would require appropriate guidance and assistance.

    In the real estate industry of UAE, there is VAT. The VAT classification of real estate is determined by whether the property is commercial or residential. Commercial property supplies (including sales and leases) are subject to the regular VAT rate (i.e. 5 percent).

    Residential property supplies are normally VAT-free. This guarantees that VAT is not an unrecoverable expenditure for people who purchase their own homes. The initial delivery of residential homes within three years after completion at the time of VAT introduction is zero-rated to guarantee that real estate developers may collect VAT on residential property construction.

    In the UAE, all firms must keep track of their financial transactions and keep their financial records accurate and up to date. Businesses must register for VAT if their yearly turnover meets the minimal criteria (as proven by their financial records). Businesses who do not believe they should be VAT-registered should save their financial records in case we need to determine whether or not they should be.

    Understanding the foundations of VAT is vital and critical for businesses. Complying with VAT requirements is never an easy undertaking. HLB HAMT specializes in VAT implementation in the UAE. We assist the customer by offering VAT-related advice and training to businesses. Throughout the UAE, our VAT team of experts provides timely and careful service.

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