Decoding UAE VAT Laws for Your Business

While VAT looks complex, and its application on your goods & services and operational margins seems to be tiring and time consuming, carefully understanding UAE VAT requirements and streamlining your business operations as per the new changes can help you smoothly sail through the surge.

In this article, we’ll help you understand everything that you want to know about Value Added Tax in the UAE.

What is VAT?
VAT or value added tax is an indirect consumption tax that is levied on goods and services at the stage of production or distribution. Already applicable in more than 160 countries worldwide, VAT has helped the UAE government build a good capital buffer and diversify its revenue.

Which goods and services are being taxed?
All non-essential consumer goods that do not find their place in the list of basic food and essential commodities fall under the new tax bracket. This includes electronics, automobiles, jewelry, digital marketing services, restaurants, and entertainment.

However, more than 100 essential food items and the categories they fall into, like food, education, health, transport, fuel, and social services, are exempted from VAT.

Are free zones exempted from VAT?
Yes, the designated 20 free zones in the UAE are exempted from VAT. However, good and services of the free zones are subject to tax if they are used or altered during the transfer process or are not being transferred as per the rules of Gulf Cooperation Council (GCC) Common Customs Law.

How will the new VAT laws impact your business?
If your business falls under the non-essential goods and service category, you would have to pay the Value Added Tax for your offerings. However, here you need to understand that VAT is not just an accounting challenge; it affects every part of your business, right from revenue, costing, and cash flow to reporting, accounting, and profitability. To cope up with the changing scenarios, you would have to address and correct all the deficiencies in the operating model of your business and make sure that VAT for business doesn’t take a toll on your income and profit margins.

How can you make your business VAT-ready?
To make your business VAT-ready, you need to prepare a comprehensive action plan and carefully consider the impact of this indirect tax on your organization, people, technology, processes, cost and revenue. Here are some of the activities you need to consider to make your business VAT-ready:

• Understand VAT in its totality
• Register for VAT
• Evaluate key areas of impact
• Streamline your business operations to comply with the UAE VAT requirements
• Recalculate your cost and profit to keep enjoying favorable returns
• Train your accounts, tax, and invoicing teams to successfully implement the new changes
• Continually track policy development and updates regarding VAT

How can we help?
We, at Maven Consults, are the UAE’s leading and most sought-after business consultants. We provide extensive support services to help entrepreneurs and expats set up their business in Dubai, quickly and in the most hassle-free manner. Our experts also provide professional tax consulting services for VAT for businesses in Dubai. After carefully understanding your business model, we create a designated VAT implementation strategy that suits you and your business the best. We can help you with all the registration formalities as well as conduct professional training for your employees to help them understand the new changes and apply them successfully. Get in touch with us now to know more about our expert services or for quick assistance regarding VAT.