All of the services that are categorized under the value added tax purview and shall be attracting thee standard rates until a particular unit of services are discharged. The value added tax liability shall also rely on where the particular services have been rendered. If services are rendered in the nation it shall be considered as taxable. The services, for instance implementation, consulting or labor resourcing that is needed beyond the boundaries of the nation might not consider as taxable. Government recently has announced that value added tax shall possess a diverse effects on several sectors offering services. Moreover, when it comes to the UAE, the FTA that is the Federal Tax authority shall be declared a selective taxation demand of 50% on carbonated beverages and 100% on energy beverages and tobacco which are to be implemented in the fourth quarter of the current year.
Also according to the Unified VAT agreement contracted by the nations under GCC that includes the United Arab Emirates, Kingdom of Saudi Arabia, , Sultanate of Oman, State of Qatar, the state of Kuwait, Kingdom of Bahrain in second quarter of the year 2017, the food items were subjected to the fundamental VAT percentage of 5%. The member States might apply as zero-rate on the food products stated in a combined list of products that are yet to be accepted by Economic and Financial cooperation committee. Take a detailed look at the impacts of VAT n F&B sectors of GCC below.
The VAT Impacts on Purchase
Importations are predicted to attract value added taxes under Reverse Charge Mechanism until and unless specific elements are stated as zero-rated. E staple food items and essentials and are Zero rated. Outsourced labor power that is common in this particular sector shall be subjected to value added taxation however, is to be claimed as an Input taxation credit.
The VAT Impacts on Sales
The supply of food products denoted in the Article 31 of unified GCC Agreement, on the food products stated in the list of products accepted by the Economic and Financial Cooperation Committee shall be zero-rated. The supply of food productions other than the fundamental food products as stated in GCC agreement article 31 shall be charged at an average rate of 5%. Catering and restaurant and other services shall charge an average rate of 5%.
As said and done, the overall impact of value added tax on F&B as shown by government shall range up to 5% in case of food and beverages.