UAE VAT: VAT applicability in Dubai

UAE introduces indirect Tax from 1st Jan 2018

UAE VAT was introduced from 1st January 2018.

VAT was implemented to strengthen the Govt, One of the most important reason of implementation of this taxation regime was to help government to move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

  • VAT Rate

The standard rate 5% will be levied on all Taxable Supplies.

  • Registration

If a business is having Annual turnover limit of more thanAED 375,000 in preceding 12 months, it will be required to register for VAT. Option to get oneself registered on voluntarily basis has also been provided if the value of supply or expenses exceeds AED 187,500/-.

Tax Registration Number (TRN) is A unique number issued by the Authority for each registered Tax payer.

  • Invoice (Credit) method to be followed

This method is also called the ‘Tax credit method’ or ‘Voucher method’ as the business takes the credit of the tax paid by him on the inputs purchased by him and deposits the balance amount to the VAT department.

This method will be clear from the following illustration:

Stage

 

Particulars

 

VAT

Liability

 

Less VAT

Credit

 

Net Tax to

Government

I A farmer grows cotton & sells it to a processing factory.

He collects VAT from the factory & pays it to the government.

AED 500 Being the first seller, he will not get any VAT credit. AED 500
II Cotton are than processed into fabric & VAT is charged by factory owner from tailor. AED 750 He will get input of VAT paid to farmer i.e.AED 500 AED 250
III Fabric is stitched to make T-Shirts which are then sold to customers at retail outlet. AED 1000 He will get input of VAT paid to factory owner i.e.AED 750 AED 250
  • VAT to be introduced in other Gulf Cooperation Council countries also:

 VAT will be introduced in all the Gulf countries latest by January, 2019 and in that direction, have already unanimously passed the Framework, which is consumption based model for common law.

The Member States of the Gulf Cooperation Council (GCC), are:

The United Arab Emirates,

The Kingdom of Bahrain,

The Kingdom of Saudi Arabia,

The Sultanate of Oman,

The State of Qatar, and

The State of Kuwait,

 

For detailed knowledge of U.A.E. – VAT please refer the background material released by The Institute of Chartered Accountants of India on the link provided here under:

Click here to download the ICAI back ground material on UAE VAT

 

Source: https://studycafe.in/

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