The introduction of VAT tax in the UAE has led to major changes in UAE. It is a type of tax that is levied in each stage of the supply chain. The implementation of VAT will give the right path to a new efficient taxation system. The introduction of VAT had many impacts on individuals, businesses, and the government.
UAE is considered to be one of the best countries in the world when it comes to the quality of public services. The country has the lowest inflation rates and got the best infrastructure and quality of aviation sector. Since the country was formed, UAE had been highly reliant on the sale of oil and take care of the government spending through the revenue generated. This led to the rapid growth and development of the country. But now the question arises from the people and government that what will happen in the future where oil is not very valuable and cheap? Therefore, it seemed important to the rulers to establish plans and projects which is not dependent on the extraction of oil and gas to lead its economy. The main reason for the implementation of VAT in the UAE is to fulfill the fiscal gap and provide a new source of income that will diversify the country’s source of income.
We at Elevate Accounting & Auditing are functioning for more than a decade and have expertise in VAT Audit in UAE, and have gained trust over the period of time in UAE. We help businesses to grow and be ahead of their competitors in the market. Be it a startup or years old business we have offered great auditing services in Dubai. We are an FTA registered TAX Agent & Agency, which provides accounting and auditing services in UAE.
The reason behind VAT Audit, if a company’s own accountant is taking care of the VAT Compliance & Accounting both there might be chances of mistakes. Any mistake in the VAT filing, any delay in the VAT registration, any delay in VAT Deregistration all approaches penalty. So it is better to outsource the VAT-related work to the TAX Agency. Tax Agents are naturally updated with all the new amendments to the VAT law. Outsourcing to VAT consultant brings peace of mind and chances of penalty is zero.
Following are the records that should be maintained for a minimum of 5 financial years in the UAE –
• Sales invoice
• Purchase invoice
• Debit and credit notes
• Export and import records
• Accounting books
• Exempt and zero-rated supplies and purchases
• The records of products and goods issued for free or use of the business
It is believed that VAT leads to increased inflation, but on the other hand, VAT also leads to a degree of deflation. If a country plans to introduce VAT as a mechanism to introduce the revenue, it will lead to a decrease in consumption. Moreover, the revenue that is generated can be used to cover the fiscal shortage and reduction from the borrowings of the public sector. In addition, VAT Accounting in Dubai has a positive impact on foreign trade, as it allows a transparent foreign trade base. The impact on the economy of VAT is that it allows the growth of the governmental sectors. It allows the government to collect more resources and funds.
There have been lots of changes in the economy due to the VAT tax in UAE and this was due to a massive decrease in the price of oil over these years. In 2020, the price of oil reached a very low point which made the people understand that why it was important to diversify the income sources in the country.
Also, the introduction of VAT in the UAE created a fear among the market that it might demotivate potential future investors. Although the rate of the tax is fixed ie., 5% still there was a fear that the rate might increase and the country might face a decrease in foreign investment. The FDI is currently stable in comparison to earlier periods. The implication of VAT had a positive impact in UAE as there was a visible growth in GDP seen.
When we talk about the impact on businesses, it was expected that they will have to face heavy changes due to the implementation in UAE. Previously, there was no tax levied in UAE except income tax on foreign banks, oil and gas companies. Businesses had to adopt the new tax system imposed in UAE as they will have to comply with the new tax law. VAT implication did not mean that the business will have to pay the tax to the government as the tax is paid by the end-user. But the business will get a tax refund on the amount which the end-user will be paying. However, the effects of VAT on business are not related to tax paying to the government by the companies they have to imply as they have to adapt to the changes required with the new tax rules. This means the companies will have to make changes in their existing management and accounting system and make it proficient to be able to collect VAT and file the same to FTA.
For a better understanding, VAT consultancy services in UAE are required. The consultancy registered with FTA helps the business to guideline and filing of the order in which VAT compliance UAE is done.
Elevate attempts to be one of the best VAT consultancy service providers in Dubai, by providing quality services to the clients. We deliver the services as per the requirements of our client in the stipulated time period.