VAT

VAT stands for value-added tax and as the name suggests this tax applies to the increase in the value of the goods at various stages. It is a kind of indirect tax that people will pay not on what they earn but on what they spend. The VAT has been introduced in the UAE and is applicable at 5%.

All companies with annual earnings of more than AED 375,000 and above will have to register for VAT and would need the services of VAT consultants. We offer VAT Consultancy with our panel of experts on the subject. Companies earning between 187,500 and 375,000 have the option of registering for VAT.

VAT is charged at each step of the “supply chain”. Ultimate consumers generally bear the VAT cost while the Business collects and accounts for the tax, in a way acting as a tax collector on behalf of the Government.

A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to the government reflect the ‘value-added’ throughout the supply chain.

To fully comply with VAT, we believe that businesses may need to make some changes to their core operations, their financial management and bookkeeping, their technology, and perhaps even their human resource mix (e.g. accountants and tax advisors). The final responsibility and accountability to comply with the law are on business.