- June 4, 2016
- Posted by: admin
- Category: News
Business needs to take an initial VAT registration to effectively implement the VAT mechanism. But it is expected that only businesses that meet a certain minimum annual turnover will have to register for VAT. That is, many small businesses will not need to register for VAT. This can safeguard small businesses from the extensive documentation and reporting that a system like VAT requires.
Also, businesses may not need to register with the government if they only provide goods and services which are not subject to VAT.
Please note: It is not yet finalized the specific conditions (such as minimum annual turnover) that will help identify businesses that do not need to register for VAT.
Responsibilities of businesses
Businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should also maintain their financial records accurate, in case to prove whether to be registered or not.
VAT-registered businesses generally:
- must charge VAT on taxable goods or services they supply;
- may reclaim any VAT they’ve paid on business-related goods or services;
- keep a range of business records which will allow the government to check the transactions at any time.
It will be also the responsibility of a VAT-registered business to report the amount of VAT charged (Output VAT) and the amount of VAT paid to the government after deducting the Input VAT, on a regular basis. It is expected to be a formal submission and which is likely to be an online reporting.
If the VAT (Output VAT) charged is more than the VAT paid (Input VAT), then the difference amount will be the VAT payable to the government. If the Input VAT is more than the Output VAT then you may be eligible for a VAT credit or refund.
Preparation for VAT
Concerned businesses will need to meet requirements to fulfill their tax obligations. To fully comply with VAT, businesses will need to make changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g., accountants and tax advisors). It is essential that businesses try to understand the implications of VAT once the legislation is finalized and make every effort to align their business model to government reporting and compliance requirements.
Government may provide businesses with guidance on how to fully comply with VAT once the legislation is finalized. But the final responsibility and accountability to comply with law is on the business.
Impact on economy
Implementation of VAT may affect the cost of living as it is a value added to the cost of the goods or services. The cost of living is likely to increase slightly, but this will vary depending on the individual’s lifestyle and spending behavior. If your spending is mainly on those things which are relieved from VAT, you are unlikely to see any significant increase.
Since the VAT is intended to help improve the economic base of the country, we can consider the increase in cost of living will be rewarded.