|Time:||18:30 - 21:00|
|Venue:||Intercontinental Hotel, Abu Dhabi|
Post Event Wrap-up: VAT Readiness Seminar
Here in the UAE, we’ve heard that a VAT will be introduced so many times that we’ve just about stopped listening. At least that is what you would believe if you attended our VAT Readiness seminar on Monday evening. When Grant Thornton’s Tax Director Michael Vaughn asked for a show of hands to indicate who has started preparations for the VAT introduction; a mere five hands were raised.
What is VAT?
VAT, or Value Added Tax, is a tax imposed on most transactions where goods and/or services are exchanged for a consideration (a payment of money or in kind). The Ministry of Finance website explains that:
“VAT is one of the most common types of consumption tax found around the world. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia.
VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.”
When will the VAT launch?
In the UAE, VAT is due to launch on 1 January 2018. The legislation is due to be released in July 2017, allowing six months for businesses to understand their obligations and prepare their businesses.
What do I need to know?
There is already a lot of information available in public domain and at the seminar, Michael Vaughn shared more still. Some key pieces of information include:
- The GCC Countries have signed a VAT framework agreement that sets out the broad terms and intentions of the tax, but countries will create and administer their own legislation.
- The UAE’s VAT will be 5%. Some products and services will be zero-rated and others from the education and health sectors will be exempt.
- Businesses should maintain documentation for five years, in case of audit.
- VAT is charged on the top line (the sale amount) not the bottom line (your profit).
- Free zone regulations are not yet available.
What do I need to do?
- Visit the Ministry of Finance website regularly for up to date information, and register for a MoF workshop: https://www.mof.gov.ae/En/budget/Pages/VATQuestions.aspx.
- Register your business for VAT
- Registration is mandatory for businesses with sales exceeding 375,000 dirhams per annum.
- Voluntary registration is available for businesses with sales between 187,500 dirhams and 374,999 dirhams per annum.
- Prepare your business to collect, pay and report on VAT transactions.
- A VAT clause should be included in contracts ASAP, payment begin on 1 January, 2018.
- Your IT systems should be able to add VAT to relevant transactions as well as track VAT payments and generate your reports.
- Prepare for cashflow implications; you will be liable to pay the VAT the quarter an invoice is raised so will need a very tight grip on your collections and payment schedules.
All information is based on the presentation by Mr Michael Vaughn to the joint business groups seminar in Abu Dhabi on 22 May 2017. Business should seek independent advice before implementing changes to their businesses.