The UAE has yet to publish its VAT law but has established a federal tax authority to deal with the levy.
VAT registration required for UAE companies with revenues over Dh375,000, says Ministry of Finance
The Ministry of Finance will start registering companies that are above the yearly threshold for value added tax in the second half of this year as the country gears up for implementing the 5 per cent levy from January 1, 2018.
The ministry announced that businesses that provide taxable goods or services, with annual revenue of more than Dh375,000 will be required to register. Businesses with taxable supplies below Dh375,000 but over Dh187,500 will have the option to register, it said.
The ministry could not be reached for further comment on registration procedures.
The UAE has yet to publish its VAT law but has established a Federal Tax Authority to deal with the levy. The authority will administer, collect and enforce federal taxes and will perform tax audits and administer penalties in cases of non-compliance with the tax laws.
Last week, the Federal National Council approved a draft law that paves the way for VAT and excise duties on selected items, such as tobacco and fizzy and energy drinks by setting up a legal framework for taxation.
The ministry has started awareness sessions about VAT and excise tax implementation for businesses, including small and medium-sized enterprises, to prepare them for the implementation.
The first workshop targeted chambers of commerce and departments of economic development, consultancies and partners, with more than 500 attendees at the event.
“These workshops also serve to underline the importance of the new tax system as a necessary step towards securing a sustainable future for the UAE, while making sure businesses are fully prepared to file their tax returns and adapt to the new tax law,” said Younis Haji Al Khoori, Under-Secretary of the Ministry of Finance, according to Wam, the state News Agency.
The introduction of value added tax in the UAE next year, in tandem with the other GCC countries, will boost government revenue, which has taken a hit with falling oil prices.
VAT could generate Dh12 billion in its first year and Dh20bn in its second year, according to Sultan Al Mansouri, the Minister of Economy.
The Ministry of Finance plans to give businesses a grace period – yet to be decided – to deal with implementation of the law, according to Saeed Al Yateem, Assistant Under-Secretary of Resources and Budget Sector at the Ministry of Finance.
None of the six GCC countries have published VAT laws. GCC member states that are not ready to implement VAT by January 1 will have to introduce the levy from January 1, 2019, the UAE’s Ministry of Finance said.
There is still no clear picture of the type of products and services that will be taxable.
The issue becomes more complicated because some sectors are expected to be exempt, while others, such as exports and international transport, will be zero-rated.
Businesses exempt from VAT will not be able to recover from the government the tax incurred on the cost of an item or a service that is not exempt, and it will be up to the business to decide whether to pass on the VAT cost to the consumer.
But when businesses have zero-rated services and goods they can reclaim from the government any VAT they have paid on costs.
More Value Added Tax coverage
■ Analysis: Who should worry most about VAT in the UAE?
■ Comment: The basics of value added tax
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