As a resident, it is essential for you to understand taxation because they determine the price of most goods and services. This is even more important if you are a business owner because being tax compliant is vital when running a legitimate and profitable business. The concept of the VAT is new in the UAE, especially in Dubai. It came into effect in January 2018. Therefore, in this regard, top auditors in UAE have compiled a list of the FAQs to help you better understand this concept.
What is VAT?
VAT or value added tax, as it is called, is an indirect consumption tax imposed on numerous goods and services. Basically, as a consumer when you pay for a good or service, a certain percentage of the amount spent is remitted to the government. As a business owner, you will need to keep records of the amount of tax collected with each sale, and then pay this money to the government. Working with qualified auditors in UAE will ensure that you remit the amount required.
Why was VAT introduced?
The introduction of additional taxation on items tends to raise the cost of living, and therefore, most people would prefer that all taxes were scrapped. However, VAT in the UAE was applied to generate additional revenue for the government. This revenue is used to provide public services like healthcare, education and infrastructure development. In specific relation to the UAE, the introduction of this form of taxation is a step by the government to reduce dependence on revenue from the sale of oil.
Will the VAT rates affect the cost of living?
The government has set the VAT rates at 5% on all items. Primarily, this will raise the prices of most commodities but by a minimal margin. Therefore individual spending habits will determine whether you feel the burden on this levy. The government will set up rules to ensure that individual business owners do not exploit this levy by ridiculously raising the prices of items. These rules will require that they specify the tax charged on every time. Therefore, when buying something, you can know the tax levied, and use this information to make your decision.
Which is the VAT exempted services or businesses?
Some services and products will be exempt from the VAT. For example, financial services, education-related services, and goods, crude oil, and natural gas, local passenger transport. The list is quite extensive and therefore before you make any applications, you might want to confirm whether the goods or services you offer are on this list.
What are the rules on VAT and business registration?
First, it should be understood that not all business have to apply for VAT registration. The government put measures in place to safeguard small business owner. Therefore, as of now only companies with a certain annual turnover need to go through this process. Your financial position will best be determined by hiring a company that offers auditing services Dubai Essentially, as a business owner you will be required to sign in and then registers through the UAE federal tax authority website. www.tax.gov.ae