Know About VAT in Abu Dhabi
VAT stands for value added tax and was introduced in UAE on 1st January in 2018. The rate is 5 percent. It is considered as a new source of income for UAE. It will be utilised to provide high quality services to public. It reduces dependence of revenue on oil and other hydrocarbons.
Requirements for registering for VAT
Registration for VAT is compulsory if the taxable goods and other imports cross AED 375000 per annum. Registration for businesses with imports and supplies exceeding AED 187500 per annum is optional.
How to register for VAT?
Registration for VAT can be done on eServices section on FTA website by creating an account first. VAT Registration User Guide provides detailed information on the same.
How is VAT collected?
Businesses registered with VAT collect the tax on behalf of the government. A 5 percent increase in the cost of the goods is the VAT that the customers bear on the taxable goods in Abu Dhabi and other parts of UAE as well. VAT registered businesses pay 5 percent on supply of goods and services at every step of supply chain. Tourists of Abu Dhabi are also required to pay VAT.
On which businesses does VAT apply?
Filing a return for VAT
VAT registered businesses and people have to submit a ‘VAT Return’ to Federal Tax Authority at the end of each tax period. It summaries the purchases made and show’s the person’s VAT liability.
Liability of VAT
Liability of VAT is the difference in the VAT charged and the VAT incurred on purchases in the same tax period. The former value is known as the output tax and the later as input tax.
When the Input tax exceeds the output tax the person is entitled to set the excess tax recovered off against subsequent payment due to FTA. In case the opposite happens, the difference has to be paid to FTA.
How to file VAT return?
A person or business needs to meet all the requirements for tax returns before filling the VAT return by filling the form. The form needs to be filled at the FTA portal online.
When are businesses required to file VAT return?
Taxable businesses need to file for VAT return within 28 days of the end of tax period. The tax period defined for each type of business is different and according to the VAT that needs to be paid.
VAT return needs to be filled quarterly for businesses that have below AED150 million turn over per annum VAT return needs to be filled monthly for businesses that have AED150 million or above turn over per annum The FTA can allot a different tax period according to it’s choice for a certain typw of business.
Not being able to file the VAT in a given time period is an offense and can lead to heavy penalties.
Implications of VAT
There are implications of VAT on individuals as the cost of living has increased depending on an individual’s lifestyle.
The implication on businesses is that it is now necessary to document every cost related to VAT charges. They must charge VAT on taxable services provided by them regularly.
This amount must be reported and paid to government regularly. The reporting for the same is done in online mode.