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Dubai

Presentation On UAE VAT

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Published in: Accountancy: Tax
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Understanding UAE VAT

Nishat P / Dubai

0 year of teaching experience

Qualification: Master degree. Subject Economics

Teaches: Maths, Islamic

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  1. VAT VALUE ADDED TAX J.JA: VAT
  2. What is TAX? Tax is the means by which governments raise revenue to pay for public services. Government revenues from taxation are generally used to pay for amenities such as public hospitals, schools and universities, as well as defence, infrastructure and other important aspects of daily life. There are many different types of taxes, namely: 2. An Indirect Tax 1. A Direct Tax Which is collected for government by an Which is collected by government from intermediary (e.g., a retail store) from the person on whom it is imposed (e.g., the person that ultimately pays the tax income tax, corporate tax). (e.g., VAT, Sales tax
  3. What is Value Added Tax (VAT)? Value Added Tax (or VAT) is an indirect tax. VAT is imposed on most supplies of goods and services that are bought and sold. VAT was introduced in the UAE on 1st January 2018. VAT is charged at each step of the "supply chain". Ultimate consumers generally bear the VAT cost while businesses collect and account 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 add" throughout the supply chain. Page 3 and Page 4 are a simple, illustrative example explaining how VAT works (based on a VAT rate of 5%):
  4. Farmer • Farmer grows and harvest the rice; and sold to the factory. Farmer collect VAT from the factory on behalf of government. Factory • Factory bought from farmer. They do milling the rice and do the packing which are sold to a retailer. Factory collect VAT from retailer on behalf of Government. The factory receives a refund on the VAT paid to the farmer Retailer The rice packets are stock in store and ready to sale to the customers. Retailer collect VAT from the customer on behalf of Government. Retailer receives a refund on the VAT paid to the factory. Customer Customer buy rice packet.
  5. Farmer Factory Retailer Customer sale QTY 100 100 100 100 Sale Price 10 12 15 17 Total Sales 110 120 150 170 VAT Charges on sales 5.50 6.00 7.50 8.50 VAT Recovered on Purchases 5.50 6.00 7.50 Total VAT paid by final customer Net VAT Payable 5.50 0.50 1.50 1.00 8.50
  6. Registering for VAT • A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000. • Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500. • Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.
  7. 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 that they have got things right.
  8. VAT in real estate The VAT treatment of real estate depends on whether it is a commercial or residential property. Supplies (including sales or leases) of commercial properties are taxable at the standard VAT rate (i.e. 5%). and this includes all buildings or parts thereof that are not residential buildings.
  9. Zero-rated sectors Exports of goods and services to outside the GCC. International transportation, and related supplies. Supplies of certain sea, air and land means of transportation (such as aircrafts and ships). Newly constructed residential properties, that are supplied for the first time within three years of their construction. Certain investment grade precious metals (e.g. gold, silver, of 99% purity). Supply of certain education services, and supply of relevant goods and services. Supply of certain healthcare services, and supply of relevant goods and services.
  10. VAT- exempt sectors The following categories of supplies will be exempt from VAT: > The supply of some financial services >Residential properties >Bare land >Local passenger transport (Metro, Bus, Taxi etc.)
  11. p, e VAT VAT A farmer to a factory. Farmer Factory Retailer facttwy the cotton ck)thes which Me to a retel chain AED 1000 AED 3000 AED 5000 to VAT AED 50 AED 150 AED 250 The St cxzkOd in put to VAT AED O AED 50 AED 150 Total VAT paid by final consumer a new Net VAT AED 50 AED 100 AED 500 AED 200

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