Things You Should Know About VAT In UAE
Everyone is talking about VAT in UAE since 2016, however, the day is not so far when we will actually pay 5% VAT. VAT will be effective from 1st January 2018. So, below are the things you need to know about VAT in UAE.
What is VAT?
VAT or Value Added Tax is a type of income source for Govt.
Do you need to pay VAT on your income?
No, it’s not income tax. Dubai & UAE remains tax-free country on your income. However, you will need to pay VAT on some items.
What items comes under VAT?
Electronics, smart phones, cars, jewellery, watches, eating out, and entertainment will fall under the taxed category. GCC countries are also expected to introduce excise duties on certain beverages that are deemed to be harmful to health, including those with high sugar content.
What items are VAT Free?
The UAE government has already announced that 100 food items, health, education, bicycles, and social services would be exempted from VAT.
UAE business needs to pay VAT?
All UAE businesses subject to the Value-Added Tax have to submit their tax declaration statements on a quarterly basis after the VAT law goes into effect starting January 2018, according to the Ministry of Finance. It is optional to register between Dh187,500 and Dh375,000 and UAE businesses will be able to start VAT registration in Q3 2017 and it is compulsory to be registered by Q4 2017.
One major question that comes up if visitors are required to pay VAT. The answer is yes at the moment. What that means is when visitors leaving the country cannot claim a VAT refund.
Millions of visitors and tourists to the emirate are unlikely to get their VAT refunded at airports and other border exit points of the country when the new consumption tax is introduced in the Gulf for the first time on January 1. “We don’t expect there to be huge refund claims for VAT at the launch stage,” sources in the Ministry of Finance told this newspaper. “However, if this is not the case, the VAT refund system will be put in place at a later stage,” the sources added.
On January 1, 2018, the UAE will join the club of nearly 150 nations by implementing a five per cent VAT in the country to diversify revenue sources. VAT is expected to generate up to Dh12 billion revenue in its first year of introduction and may generate between Dh18 billion and Dh20 billion in 2019.
There is still speculation on whether the VAT regime will add to inflation. At the ground level of the common man, the impact will be minimum. However, at the high-end and luxury segment, the impact could be much higher (cars, real estate etc.)
Read more about DMCC Freezone VAT Regulation and how can register your business for VAT in UAE
We will keep an eye on any further update on VAT. As soon as we hear anything we will let you know.
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