Know About VAT in Abu Dhabi
VAT in Abu Dhabi, other parts of UAE stands for value added tax and was introduced in UAE on 1st January 2018. The rate is 5 percent. It is considered a new source of income for the UAE. It will be utilized to provide high quality services to the public. It reduces the dependence of revenue on oil and other hydrocarbons.
Requirements for VAT Registration in Abu Dhabi and other Parts
Registration for VAT in Abu Dhabi and other parts of the UAE is compulsory if the taxable goods and other imports cross AED 375000 per annum. Registration for business setup service with imports and supplies exceeding AED 187500 per annum is optional.
How to Register for VAT in Abu Dhabi?
VAT Registration in Abu Dhabi can be done on the eServices section on the 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 % 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 the UAE as well. VAT registered company setup in Abu Dhabi pay 5 percent on supply of goods and services at every step of the supply chain. Tourists of Abu Dhabi are also required to pay VAT.
On which businesses VAT in Abu Dhabi apply?
VAT is applied on tax related businesses in Abu Dhabi Mainland or Abu Dhabi free zones. Goods transfer between the designated zones are tax free.
Filing a return for VAT
VAT registered business setup in UAE and people have to submit a ‘VAT Return’ to Federal Tax Authority at the end of each tax period. It summarizes the purchases made and show’s the person’s VAT liability.
Liability of VAT
Liability of VAT is the difference between 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 the 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 a 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 do businesses need to file VAT returns?
Taxable businesses need to file for VAT returns within 28 days of the end of the 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 its choice for a certain type 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 company registration in UAE 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 the government regularly. The reporting for the same is done in online mode.