VAT Now!

By November 10, 2017 Uncategorized No Comments
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Over the past decade or two, the UAE has made continued efforts in diversifying revenues away from oil and gas, by focusing on non-oil sectors including trade, finance, transport, tourism and healthcare. Another step in this direction is the introduction of a consumption tax in the form of a Value Added Tax of 5% effective 1st January 2018 as an additional source of revenue. In the first year of its implementation, this move can help generate more than AED 12 billion in additional revenues, as claimed by experts.

It is difficult to gauge how the introduction of VAT will affect businesses as a whole; subject to what type of goods and services the business offers. In the case of F&B businesses i.e. restaurants, we do not anticipate an impact on profitability, but cash flows will be affected. The government intends that VAT will primarily focus on taxing discretionary spend by consumers, at the same time protecting those at the lower end of the spectrum.

As per the UAE government, food items, health, education, bicycles and social services will be exempt from VAT, while electronics, smart phones, cars, jewelry, watches, eating out and entertainment will be taxable. Needless to say, consumer behavior will change, but gradually over time, which will turn trickle down to overall business development and growth.

As the implementation of taxes might seem overwhelming for most businesses in the UAE, who have never dealt with it before, our goal is to provide a set of guidelines to help your business be ‘VAT’ ready.

Key Points to Know:

  1. Who? VAT applies to any businesses whose annual VAT taxable turnover i.e. income, exceeds the mandatory registration threshold of AED 375,000. Business may also apply for a voluntary registration for VAT, if the annual turnover is below the mandatory registration threshold but exceeds the amount of AED 187,500.
  2. When? VAT will be effective from the 1st of January, 2018. As such:
    1. Businesses with an annual turnover exceeding AED 150 million should have registered before the deadline of 31st October 2017.
    2. Businesses with an annual turnover exceeding AED 10 million should apply for registration by 30th November 2017.
    3. All other business entities with an annual turnover exceeding the mandatory registration threshold of AED 375,000 should apply for registration, latest by 4th December 2017.
  1. Why? VAT is not simply a financial dilemma – it will affect the entire businesses and proactive steps will need to be taken at various stages, starting from setup and registration to on-going management and filing of returns at regular intervals. Businesses will need to ensure that their POS as well as their accounting software is VAT compliant. Furthermore, the team must be trained to ensure they understand and accurately execute the process of VAT to avoid hefty fines, which range from AED 3000 to AED 50,000 depending on the offense committed. If a business fails to keep required records and other information specified in the laws, it will be fined AED 10,000 in the first instance and AED 50,000 in case of repetition.

  4. How? Xcel Accounting, Ribbon’s trusted Accounting Partner, is offering a complimentary 2-hour informational session on VAT with an F&B focus, followed by a focused 1-hour complimentary one-to-one consultation to outline your VAT strategy.

VAT IS HERE

To register for the VAT workshop, visit the link: http://xcelaccounting.info/vat4FnB

We also recommend drawing up a detailed set of Financial Standards (SOPs) outlining the Do’s and Don’ts critical for the business. Ribbon, in conjunction with Xcel Accounting, can help develop customized financials SOPs, which will help streamline systems that are critical for the profitability of the business, while ensuring it is VAT compliant. These include inventory management procedures, procure to pay procedures, pilferage and wastage management amongst others. Furthermore, we can setup trackers to monitor the business health and implement Key Performance Indicators (KPIs) to ensure targets are being met in line with company objectives.

To know more about VAT and to get your business ready with the right financial SOPs, get in touch with Ribbon at (971) 4 360 5758. You may also write to us at info@ribbon-me.com and we will be happy to help.

(Sources:)  

 

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