Business Setup Overview
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VAT Services
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Overview
The United Arab Emirates Government introduced Value Added Tax (VAT) on 1st January 2018 with a standard rate of 5% on all goods and services in the country. Businesses in UAE including those managed by Indian entrepreneurs or investors can benefit from VAT registration to recover certain costs related to this tax.
We get many queries related to VAT. Below are some of the most common questions we get from our clients based in India and abroad.
VAT is an indirect tax on goods and services, similar to consumption tax in many countries. It is a comprehensive, multi-stage consumption tax that applies throughout the supply chain and is collected by registered businesses on behalf of the government. Ultimately the VAT burden falls on the consumer, who is the end user and not on the businesses themselves.
Value Added Tax (VAT) is an indirect tax on consumption of goods and services. It’s a multi-level tax applied throughout the supply chain and collected by businesses on behalf of the government. Eventually the VAT cost is borne by the end consumer not the business itself.
The main objective of implementing VAT in the UAE is to diversify revenue sources and reduce dependency on oil based income. VAT supports the government’s aim to provide better public services and infrastructure by generating more revenue through taxation.
Financial impact: Once VAT is part of your business’s financial structure, you may need to adjust your pricing due to irrecoverable VAT components. It will also affect your working capital and cash flow especially in cases of long credit terms or zero rated transactions. Mismanagement of VAT claims will cost your business extra. For group companies (VAT groups) mismanagement will lead to unrecoverable VAT liabilities. Operational impact: You will need to review and amend contracts with suppliers and clients to include VAT obligations. IT systems will need to be upgraded to capture VAT data and reporting. Sales and procurement departments will need to adapt to handle VAT procedures efficiently. Compliance impact: Compliance includes mandatory VAT registration based on annual turnover, regular filing of returns, setting up internal controls and being ready for FTA audits. Non compliance with VAT rules will result in penalties and legal consequences.
Flyingcolour® assists in all types of company registrations in United Arab Emirates. We assist in Mainland, Free zones or Offshore company registrations in all Emirates of UAE. We also assist in opening bank account with all local leading banks. We closely work with all Government Departments and banks.