The UAE is a federation of emirates which are seven in number. These are autonomous emirates and local governments. There is no income tax. The tax is imposed on some foreign banks and oil companies. The VAT was introduced in 2018 here @5%.

Revenue Generation

Here, major revenue is generated from the sale of oil to foreign countries. UAE has been looking forward to generating revenues from other sources such as sell of hydrocarbons and through VAT.

In the UAE all businesses should get the registration for VAT if their taxable supplies exceed the limit of AED 375, 000. A business can also choose to register itself for VAT voluntarily even if their supplies are less than the mandatory registration limit. There is an opportunity for business start-ups to get themselves registered for taxation.

Criteria for Company Deregistration

If the annual turnover of a company is less than the voluntary threshold level for continuous 12 months, the company may apply for deregistration. If they fail to apply for deregistration, there will be a certain amount of fine imposed on them.

For the following, the VAT will be @0%:

  • Exports of goods and services to the places out of GCC
  • For international transportation, supplies of goods, the supply of aircraft and ships, gold and silver, new residences,
  • Supply for the purpose of education and the supply of goods and services for them.
  • There won’t be VAT for healthcare-related supplies, etc.

VAT Exemptions in UAE

The following are exempt from VAT.

Financial services supplies, residential properties, land that is not utilized, and public transport.

There is provision for VAT audit done by FTA. It will be done to make sure the compliance’s of the taxation laws are in place. Audits can be done at the place of work or business. There is a provision for a 5-day notice to the concerned parties about the Audit. The concerned party or the business can file their tax return online on the portal of FTA. It will be done according to schedule.

The authorities of FTA will check the returns and other details. It is given in the rules that the audits cannot be done for any specified reason. It can be done any time for any reason whatsoever.

The taxpayer and the auditors can meet at a pre-decided place at a particular time. Once they meet there, the proceedings may commence. The parties have the right to ask of the auditors their credentials.

It is specified by the law that the audit shall be conducted within the office hours of the FTA. There is an exception to this. The Director-General can change the timing outside office hours as per his discretion and after assigning reasons for the same.

It is expected that the taxpayer, along with his legal representative, helps the auditor in his function.

It may be that something suspicious turns out during the course of the audit. In this situation, the auditor may decide to go for re-audit.

Compliance of VAT requires ensuring accurate VAT calculation, preparation and saving all VAT invoices, debit and credit notes and exemption of VAT on certain Services and goods. Ensure timely Tax return submission through fully-compliant and flexible software solutions. Remain VAT compliant with assistance from GCC Filings, courtesy their services pertaining to company incorporation, VAT registration, return filing, auditing, accounting and a lot more.

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