VAT in UAE: What you need 

to know

Dubai: In 2018, consumers in UAE are expected to pay a 5 % value-added tax when purchasing most goods and services

The six states in the Gulf Cooperation Council (GCC) region have agreed to implement VAT, which will generate $25 billion (Dh91.8 billion) in tax proceeds every year

The new tax policy’s go-live date is only less than a year away, yet many questions still hang in the air. Gulf News collates information from various sources, to answer some of these queries

?Will I pay VAT every time I purchase something at the grocery

No. There will be a number of items in your shopping cart that will be VAT-exempt. GCC states had already agreed to exempt about 94 food products, as well as the healthcare and education sectors.  That means your grocery, hospital or school bills will most likely remain unchanged, unless there are price hikes. A new law, however, has yet to be released to specify which items are non-taxable.

?Will the 5 % VAT increase the cost of living in UAE

The cost of living will likely go up slightly for a lot of people, but this will all depend on the individual’s buying preferences and lifestyle. If you keep on taking home things that are taxable and maintain an expensive lifestyle, expect your outgoings to increase. If one is to spend mainly on items which are not attracted by VAT, then the cost of living of the individual is unlikely to have any significant increase 

?Will businesses be penalized if they don’t collect VAT

Businesses are encouraged to implement the new tax system, but the Ministry of Finance said that the government is currently in the process of defining the exact fees and penalties for non-compliance

?When will registration for VAT begin

If the initial date for the VAT roll-out is followed, businesses can probably start registering for VAT from 1st October 2017. As announced recently, the registration will be open three months before the go-live date. Companies will have the option to register online

?How often are companies required to file VAT returns

For most businesses, VAT returns should be filed every three months. Filing of returns can also be done online using the government’s e-Services

?What should businesses do to prepare for VAT

According to the Ministry of Finance, businesses may need to change their core operations, financial management and book-keeping, technology and human resource mix in order to prepare for VAT. “It is essential that businesses try to understand the implications of VAT now and once the legislation is issued, make every effort to align their business model to government reporting and compliance requirements.” Businesses are also strongly advised to ensure that in all the commercial contracts they enter into, they include a clause that spells out that the VAT burden can be passed on to the consumer

Once the law is out, businesses would first have to figure out whether their products/services are taxable or not and if yes, they would have to ensure that their billing or invoicing process is capable of adding a VAT charge to all taxable products. The easiest way to do this is to alter your IT systems to automatically calculate and add VAT to the invoices,

?Should companies start hiring VAT professionals

Hiring new staff that will enable businesses prepare for and implement the new tax policy should be done at this point in time. Companies should have started to think about the additional resources they would need to ensure VAT compliance.  Depending on how tedious / frequent the process is, companies would need resources based on the complexity of their operations.  But one thing to bear in mind is that VAT is not only a finance issue, it flows through all operational departments of the company.  This is because wherever a company acquires products or services, it may pay VAT and it would need to capture all the documentation relating to VAT paid, in order to claim refunds

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