UAE VAT: Important Facts about GCC VAT System
Value Added Tax has been implemented in UAE, Saudi Arabia and other GCC countries from January 1 2018 and it has been considered as a great means of growth for industries as well as residents in general. Industries and residents of these countries are toiling hard to adjust with this new era of tax system. There is a great requirement for businesses and their daily operations to comply with UAE VAT.
Several workshops on VAT had been conducted by UAE chamber of commerce so that business groups and residents here become aware of this new tax law. In order to educate the financial advisors, finance minister also have held occasional briefings on the implications of VAT.
What are the Reasons for VAT in GCC?
Revenues from gas and oil constituted the prime income of GCC countries and the strength of economy was centered on it, but recent years witnessed a downfall of income from these sources. However, the governments of these countries need fund to carry out its health care and other developmental activities. It has been assessed that if GCC counties do not implement reforms, between 2015 and 2019, there will be a fiscal deficit going past $700 billion. In order to cope up with this situation, UAE/Saudi Arabia and GCC countries unanimously opted for tax reforms and thus VAT rate is fixed as 5%.
What are the taxed items?
The VAT in UAE will affect your budget on food, water, power and jewellery. VAT is 5% in UAE and compared to other countries is very low and thus it won’t break the bank for many people. At the same time, education and medicines are free of VAT.
Who will Pay VAT?
Companies with an annual turnover of more than ED 375,000 need to register for VAT. As per VAT law, tax is added to a commodity in each stage of its development and the end buyer pays it. The business entities will collect it and submit to the tax authorities. Hence, businesses are required to comply their accounting software with UAE VAT.
What are the consequences if businesses fail to make their accounting system VAT ready?
If businesses fail to upgrade their accounting software VAT compatible, they will incur fine. First time offenders will be fined AED 10,000 and every consecutive offense will incur AED 50,000 each.
What are the challenges businesses in UAE and GCC countries face in implementing VAT?
Digital transformation is the result of VAT implementation in UAE. According to seventy three percent of the businesses owners, it is an opportunity for change and the massive digital transformation within organisations. In order to conduct accounting and other activities in business firms, they need to transform their accounting software to VAT compatible. Hence, the VAT compliant accounting software provided by GCC VAT PRO is gaining popular among business owners. It is a cloud based VAT compliant accounting software available at low monthly subscription. There are a lot more companies that have not still comply their businesses with VAT ready software. Our accounting software provide user friendly and easy to handle options for companies to be compatible with VAT in UAE and GCC countries. Companies that have subscribed for our accounting software unanimously agree that all their business functions have become easy and smooth and run as per VAT