UAE VAT: What you Need to Comply
Allegiance International Legal and Business Consultancy Group can help you manage your VAT compliance from the initial stage assessment and registration, to any further legal or commercial analysis to ensure that you pay no more than you need to.
- VAT effective date will be on 1st of January 2018
- Tax applicable to standard taxable supply is 5%
Who is affected?
- Applied to goods and services (e.g. food, consulting services, maintenance works, etc.)
- Exempt Services in the UAE Include: Margin based financial services, Life Insurance, Some educational services, Some health services, residential real estate purchases, bare land, new residential housing, local, oil and gas, and international transport.
- Transactions with Charities, Gov. Funded Medical, Educational and Other Bodies are “ZeroRated,” meaning that no VAT will be levied against the transactions with these organizations. A business making sales to any of these organizations can claim a refund from the Tax Authority on VAT paid with respect to the supplies and services purchased for these sales.
- If your business’s value of taxable supplies crosses AED 375,000 over the previous 12 months, or you anticipate supplies exceeding the threshold in the next 30 days then you must register with the Tax Authority. If your business’s value of taxable supplies crosses AED 187,500 over the previous 12 months, or you anticipate supplies exceeding the threshold in the next 30 days then you may voluntarily register. The government will count the whole year as taxable if your income crosses the threshold (AED 375,000) for the subsequent year. However, you will be ineligible to collect VAT from customers this year if you are unregistered with the government. Therefore, if you’re income crosses the threshold (AED 375,000) in the subsequent year (2018) and you are unregistered beforehand, you will have to pay the tax due for that year out of pocket at the end of the year or period when it becomes due.
- Business which are not covered also need to keep their books in order, because the government may carry out audits to verify the tax status of businesses of all sizes.
- Business with a turnover exceeding AED 150 million – Deadline October 31,2017
- Business with a turnover exceeding AED 10 million – Deadline November 30,2017
- All other Business for submitting registration application - Deadline December 4, 2017 (Mandatory Deadline)
Federal Tax Authorities Service Fees:
-Tax registration and the issuance of an electronic tax registration certificate will be free of charge.
- Attested VAT Certificate – AED 500 and AED 103 for submission and service charge. This is for use in other GCC countries to obtain a tax exemption from a foreign GCC tax authority, so that the same VAT on the same goods in other GCC countries is not levied.
- Failure to register on time. AED 20,000 fine is applicable.
- Failure by the Taxable Person to display prices inclusive of Tax. AED 15,000 fine is applicable.
-Failure to comply with the conditions and procedures related to transfer of the Excise Goods from the Designated Zone, and the mechanism of processing and storing of such Excise Goods. The penalty shall be the higher of AED (50,000) or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.
- Failure by the Taxable Person to provide the Authority with price list for the Excise Goods produced, imported or sold thereby. AED 50,000 fine for a first time offense, and AED 20,000 for any repeat offense.
-Failure by the Taxable Person to display prices inclusive of Tax. Fine of AED 15,000.
- Failure by the Taxable Person to notify the Authority of applying Tax based on the margin. Fine of AED 2,500.
- Failure to comply with the conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone. This applies to the storing of goods in their correct location, and recording inventory accurately, in order to penalize tax avoidance, or sales not recorded in financial statements. For imported goods, VAT paid on imports can be claimed back from the Tax Authority while the goods remain in storage, therefore accurate records with respect to storage are mandatory. The Penalty shall be the higher of AED (50,000) or (50%) of the Tax chargeable with respect to the goods hidden or unrecorded as a result of the violation.
- Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any supply. AED 5000 fine for each incorrect alternative document or tax invoice.
- Failure by the Taxable Person to issue Tax Credit Note or an alternative document. AED 5000 fine for each incorrect tax credit note or alternative document.
- Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes. AED 5000 fine for each incorrect document.
What you need to Prepare:
- TRADE LICENSE
- CERTIFICATE OF INCORPORATION/REGISTRATION CERTIFICATE (as applicable)
- DETAILS OF ALL OWNERS (supporting documents if trade license does not include information)
- ARTICLES OF ASSOCIATION/PARTNERSHIP AGREEMENT
- COPY OF PASSPORT AND EMIRATES ID OF ALL OWNERS
- DETAILS OF MANAGER
- AUDITED REPORTS
- PHYSICAL OFFICE LOCATION OF THE BUSINESS
- CONTACT DETAILS
- BANK ACCOUNT DETAILS
- LIST OF OTHER BUSINESS (ES) OWNED BY SHAREHOLDER/OWNER
- DECLARATION ABOUT BUSINESS ACTIVITIES, for company (GCC Info) and the shareholder (UAE Info)
- DETAILS ABOUT CUSTOMS REGISTRATION INFORMATION
A. Initial VAT registration.
B. Monthly book keeping.
C. Quarterly VAT return submission – Every quarter each company has to submit a tax report on sales and expenses.
D. 5% VAT should be paid within 30 days upon submission.
- If a property owner would like to change the status of property from commercial to residential, the 5% VAT paid during the purchase can be claimed back from the Government, as it does not apply to the purchase of residential property.
- If a property owner would like to transfer the status of property from residential to commercial, the owner has to pay the 5% VAT to the Government as VAT is applied to the purchase of commercial property.
- If you make a loss on the sale of property, you may claim the excess VAT paid on the initial purchase of a property, back from the government. For example, if you buy a property for AED 1,000,000 and sell it for AED 750,000, you may claim back the excess VAT (levied at 5%) you paid on the purchase, against the amount you claimed from your customer when selling the property for AED 750,000.
Now the last date for VAT registration is over and the application date of VAT is here but that does not end the need to be updated with the laws, requirements, exemptions and penalties that are declared and that may come into effect in the future. Whether you are a registered or unregistered business owner or a consumer, it likely that you will come across situations where you need expert knowledge regarding the law in order to protect your interest. Feel free to approach us for consultations and we will be happy to help.
Allegiance International Legal and Business Consultancy Group offers an affordable and straightforward solution to manage your compliance with UAE VAT laws. With experienced legal practitioners and auditing experts, we are able to offer you a complete and comfortable solution to your VAT Compliance needs.
(All information shared to the general public by Allegiance International Legal and Business Consultancy (Allegiance) is the intellectual property of Allegiance alone. Further, the information does not, and is not intended to constitute any form of legal advice, and is provided as general information only).