UAE has witnessed immense growth and development over the years due to various factors like political stability, long term vision and focused infrastructure spending. In recent years, UAE has made efforts to engineer a diverse and oil-independent economy, with increased focus on sectors like Hospitality, Tourism, Real Estate and other large scale and Small & Medium Enterprises (SMEs). The latest episode of its plans is the implementation of 5% VAT, effective from January of 2018.
How Does VAT Work?
Value Added Tax (VAT) is one amongst many forms of government revenue schemes that help a state or country strengthen its financial reserves from the business sector and deploy its returns on public spending and welfare of its people.
VAT comes into play at different stages in the value chain that starts with production, manufacturing, distribution, and sale. Throughout this process, Value Added Tax (VAT) remains levied on the goods from one channel to the other, refunded or reclaimed by one of the two exchanging parties until it is purchased by the consumer.
How Can SMEs Become VAT Compliant?
VAT is already prevalent in over 160 countries in various forms and UAE joined the growing list when it made the announcement regarding uniform VAT Implementation. With its implementation deadline near, SMEs and other business structures are expected to mediate prompt action to endorse the new law by registering their companies for VAT with the Ministry of Finance.
SMEs act as tax collection agents while the government remains the beneficiary. Since companies in UAE will be required to collect and remit VAT from supplying parties, another important stakeholder will help maintain compliance and consistency of the implementation and collection process. VAT experts or business consultants will help SMEs update IT systems, train staff with latest accounting practices, seal financial leakages and renegotiate supply contracts per the company’s financial turnover. These measures will warrant the elimination of any errors or complexities that companies might face while inducing VAT compliance.
SMEs are already informed to apply and register for VAT under the official deadline of 1st January 2018. All VAT eligible companies are liable to penalties ranging from AED 3000 to AED 50,000 based on the nature of offence, as in case of non-compliance or delayed response, as per the Federal Tax Authority of UAE.
SMEs will present their legally bound business income, costs and VAT levied charges in official documents. Companies with fiscal proceeds below the minimum threshold must maintain all financial records in the events of dispute or as required by the Ministry of Finance. Major issues such as tampering of financial records will be dealt immediately with legal action.
How Can IBG Help?
According to experts on GCC economies, the region-wide implementation will see stable returns, bringing a robust incentive to earn, breaking consumer income-bias while compensating the UAE’s non-oil revenue by at least 1.5% of its GDP. The business community is already in great shape and spirit to fully endorse the incoming changes. At the other end of the spectrum, more than 5000 jobs are expected to be created post VAT implementation.
IBG consulting provides complete business services in UAE, including undertaking all procedures and delivering on time registration. We are committed to helping your company get the best consultation and services in 2018 to prevent any possible fines or penalties. To make the best of our services, you can call now and avail our new year offer with a 30% discount when you setup your business with IBG Consulting.