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BY Mian Muhammad Ramzan, FCMA(PK), FAIA (UK) Principal - PowerPoint PPT Presentation

Feb 17, 2024 •474 likes •735 views

UNDERSTANDING OF VAT IN UNITED ARAB EMIRATES BY Mian Muhammad Ramzan, FCMA(PK), FAIA (UK) Principal Consultant/Chief Executive, TMR CONSULTING Financial, Management & Tax Consultants Contact No . +971506204392, +971521549602 +923215224488

  1. UNDERSTANDING OF VAT IN UNITED ARAB EMIRATES BY Mian Muhammad Ramzan, FCMA(PK), FAIA (UK) Principal Consultant/Chief Executive, TMR CONSULTING Financial, Management & Tax Consultants Contact No . +971506204392, +971521549602 +923215224488 (PK) UAE Office : MBC, 9th Floor, Conrad Tower, Sheikh Zaid Road, Dubai. E-mail : tmrcuae@tmrconsult.com Website : uae.tmrconsult.com LOGO Presented by TMR Consulting

  2. Contents VAT in UAE  GCC Countries  VAT Rates in other countries  What is VAT?   Why is VAT in UAE?  How VAT works?  Input/Output Tax Exempt Versus Zero-Rated  Taxable, Exempt and Zero-Rated Items  Registration for VAT  Key Points of UAE VAT Law   Fines and Penalties  Impact on VAT on Pricing Direct Impact  Indirect Impacts  Other Impacts  LOGO Presented by TMR Consulting

  3. VAT in UAE “ VAT will be effective across the UAE from 1 st January, 2018 at a standard rate of 5% and will be applicable on Goods and Services. LOGO Presented by TMR Consulting

  4. GCC Countries Gulf Cooperation Council ( GCC ), political and economic alliance of six Middle Eastern countries . The GCC was established in Riyadh, Saudi Arabia, in May 1981. SAUDI ARABIA KUWAIT UNITED ARAB OMAN EMIRATES BAHRAIN QATAR LOGO Presented by TMR Consulting

  5. VAT Rates in other Countries Country Rate (%) Country Rate (%) Germany 19 Ireland 23 Great Britain 20 Hungary 27 Greece 23 Denmark 25 Italy 22 Belgium 21 Switzerland 8 Austria 20 Turkey 18 Finland 24 Spain 21 Saudi Arabia 5 Portugal 23 Pakistan 17 Netherlands 21 Srilanka 12 Sweden 25 India 13.5 LOGO Presented by TMR Consulting

  6. What is VAT? A value-added tax (VAT) is a type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. VAT applies to the majority of transactions of goods and services unless specifically exempted or excepted by law. LOGO Presented by TMR Consulting

  7. Why VAT in UAE? VAT will provide UAE a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue. LOGO Presented by TMR Consulting

  8. How VAT works? LOGO Presented by TMR Consulting

  9. Raw Material Suppliers Supply Chain Manufacturer Distributor Wholesaler/ Dealer Retailer/ Mini Wholesaler LOGO Consumer Presented by TMR Consulting

  10. How VAT works? How will Manufacturer Wholesaler Dealer Retailer VAT Work? Sell Buy Sell Buy Sell Buy Sell Price 1000 1000 1100 1100 1200 1200 1400 VAT (5%) +50 -50 +55 -55 +60 -60 +70 Net VAT +50 +5 +5 +10 Tax Revenue for Government +70 LOGO Presented by TMR Consulting

  11. Input/Output Tax Transaction Rate Amount in AED Input Tax ( Tax on Purchases ) Party A sells to Party B 1000.00 VAT charged to Party B 5% 50 .00 Total Value of Supply 1050.00 Output Tax ( Tax on Sales ) Party B sells above goods to Party C 1500.00 VAT charged to Party C 5% 75.00 Total Value of Supply 1575.00 Out put Tax ( Tax on Sales ) 75.00 Input Tax ( Tax on purchases ) 50.00 VAT payable by Party B 25.00 LOGO Presented by TMR Consulting

  12. Exempt Versus Zero-Rated Exempt Zero-Rated Exempt goods are In the case of those either not registered that are “zero - rated” for VAT, or, if they are, the sale is not taxed the VAT costs cannot and the supplier can be reclaimed on reclaim the VAT costs them. of supplying the product. LOGO Presented by TMR Consulting

  13. Taxable, Exempt and Zero-Rated Items Taxable Items of VAT Zero-Rated Items of VAT  Exports.  Commercial Property.  Education.  Retail Purchases.  Healthcare.  Car, Sales and Rentals.  Medicines and Equipment's.  Hotels and Restaurants.  International Transport.  Repairs and Maintenance  Crude Oil and Natural Gas. Services.  Investment in Gold, Silver and Platinum. Exempt Items of VAT  Certain financial.  Residential Property.  Bare Land.  Local Passenger Transport. LOGO Presented by TMR Consulting

  14. Registration for VAT A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000. If their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500 then a business may choose to register for VAT voluntarily . Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT. Threshold AED 375,000. Threshold exceeds AED 187,500. LOGO Presented by TMR Consulting

  15. Some other Key Points  Vat will be applicable on goods and services, chargeable throughout the supply chain and on the imports of goods and services.  The advertised Price of Goods shall include the VAT  Two or more persons conducting businesses may apply for tax registration as a tax group.  Tax Returns must be submitted on a regular basis (every three months) within 28 days of the end of the tax period.  The registrant shall issue a tax invoice within 14 days as of the date of supply.  Reverse Charge Mechanism  Taxable persons must keep tax invoices issued and received for at least 5 years. LOGO Presented by TMR Consulting

  16. Fines and Penalties  Fail to register within deadline AED 20,000 .  Fail to keep Financial and Tax Records AED 10,000 ( 1 st time ) and AED 50,000 ( repetition ).  Fail to submit documents in Arabic AED 20,000 .  Fail to report any Amendment in Records to Tax Authorities AED 5,000 ( 1 st time ) and AED 15,000 on repetition.  Tax evasion AED 500 up till triple of the value of the tax on the transaction under question.  Delay in Tax Return Submission AED 1,000 ( 1 st time ) and AED 2,000 on repetition . LOGO Presented by TMR Consulting

  17. Impacts of VAT in UAE LOGO Presented by TMR Consulting

  18. Impact on VAT on Pricing VAT being a consumption tax, tax burden is expected to reflect on the prices and consumption.  On Taxable goods, the consumer prices will increase not only by 5%, other indirect costs due to VAT implementation will increase the prices further.  Most food items will be subject to 5 per cent VAT rate, including basic goods. A major component of price increase linked to VAT  The Prices of non taxable goods will also increase LOGO Presented by TMR Consulting

  19. Impact on VAT on Pricing Cont… The impact of VAT will be more than 5% due to other associated costs which will also be passed on to the consumers LOGO Presented by TMR Consulting

  20. Other Indirect Costs System Modifications Cost of Documentation LOGO Presented by TMR Consulting

  21. Other Indirect Costs Cont… Cost of Compliance Cost of Litigation LOGO Presented by TMR Consulting

  22. OTHER IMPACTS  UAE had been considered one of the lucrative tax heavens which resulted more economic activity.  May give a jerk to the economic activity. For Accountants & Professionals Opportunity LOGO Presented by TMR Consulting

  23. “Dubai is an expensive place to live, but VAT is not going to break your bank” . LOGO Presented by TMR Consulting

  24. LOGO Presented by TMR Consulting

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