As we have entered January, the first month of the new VAT regulations in the UAE, business owners around the popular place Emirates are bracing themselves for a massive opportunity this time. UAE has nowadays operated one of the very easiest taxation systems in the world. But in order to decrease its reliance on oil-generated revenue, and then to invest more in the economy’s infrastructure, the government has nowadays taken a decision. They have determined to increase the tax revenue. As of 1st January, 2018 the absolutely VAT scheme has launched in UAE. Their government introduced this scheme in Saudi Arabia and UAE.
How VAT Impacts you: Real Estate Sector
There are a lot of people who do not have much idea regarding tax. But when you are a taxable person, you will have to know about VAT. In fact, in UAE, the government has decided that if you are buying a new house or a land, you will have to consider the VAT scheme. The same tax will be simply rolled out in the other four Gulf Cooperation Council (GCC) countries over the next year, following an agreement signed by all six countries in July 2017.
However, numerous company owners in the UAE are still recovering from what has been the hasty registration procedure, and might not have considered yet how the new laws are going to affect them. For that reason, you will have to take a look at the new VAT implementation and explore how it might impact your company in the year ahead.
What Products and Services are Covered?
The standard rate of VAT at almost 5% is now charged on most business products and services. Though, a number of services and goods –the ones that are considered most vital to the economy do not incur VAT. They’re either charged almost 0% rate or are exempt. The difference between the two is that suppliers of zero-rated services or goods can still reclaim VAT they have paid on inputs into their business. On the other hand, suppliers of excused services and goods don’t have to register for VAT at all, or if they do register, they can’t reclaim any VAT they’ve paid on inputs.
What are the Downsides of VAT for Businesses in the UAE?
As you know that VAT on UAE Real Estate Sector is one of the significant things so you will have to consider a few things about it.
- Increased costs
With the new VAT laws, your business fundamentally has an extra function to perform that comes along with an unavoidable set of admin and implementation costs.
- Changes to business structure
Besides having the significant cash flow impact on some companies, VAT will be charged at each stage of production and also distribution that can be problematic if you have more than one business entity handling the same service or product.