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VAT Domain? VAT Exemptions?
Value Added Tax is a broad-based consumption tax, it covers a vast range of products and services in its net and the burden of this tax will be ultimately bear by the end consumer. This is contrary to the direct tax, like income tax.
Every country has set its own tax net and its own specifications related to the VAT. General trend across the globe is for certain products like luxury goods (cars, perfumes) will be taxable under VAT in UAE, however basic edible elements and services such as education, medical facility and the delivery of utilities like water, electricity are either exempt or zero-rated.
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What should their first step be?
Every company should consult with their tax advisor. Before planning for VAT registration in UAE, there is need to understand its impact on their business. There is need to conduct complete homework that where they were standing and where they are after VAT implementation. For more information about VAT registration in UAE click here.
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What are the compliance requirements under VAT for companies?
Business setups should track and record VAT paid on every single business transaction, in order to present that how much VAT paid against transactional. At the end of the period, can be monthly, quarterly or even on an annual basis this data will be utilized for VAT return. Data will be uploaded to the relevant government portal. A company should design a VAT policy, considering relevant risk, implement a compliance plan & operational process, and finally evaluate its IT systems currently working.
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How to check whether tax strategies of a company having compliance with VAT law?
The best solution to check the compliance is to consult the tax advisor or expert who can help your company to understand VAT might impact its business, as well as guidelines on how they can minimize its liability.
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What are the challenges might be faced by companies in the GCC as they are preparing for VAT; and which will be focal point ensure a smooth transition?
Lack of knowledgeable resources is the main point of concern in the GCC. Companies are facing three options when it comes to dealing with VAT
- Internal:
A company has adequate knowledge and expertise to apply VAT; it means they have the capability to set up a VAT compliance operation internally. - External:
Acquiring outsourcing facility for VAT implementation, utilizing the services of a tax expert. - Co-source:
In case if a company has set up VAT function internally, but still hire the tax advisor to process tax related functions. - What are the conclusions for companies that are not ready for VAT?
Not being adequately prepared to oversee VAT means organizations are neglecting to consent to the VAT law of the nation in which they work. This could open these businesses to face fines or other legal actions.
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How will VAT affect GDP growth and inflation, will it affect investment behavior in the Middle East?
VAT is a great opportunity for this region it is providing the consistent source of revenue that leads GCC states to diversify their economies rather than depending on single source oil. When you think of VAT economic impact, it is probably one of the least affecting taxes.
Only time will decide how VAT will really affect the economy in the GCC but several investors must observe the GCC’s VAT sign of stability & motivation to change, reducing requirement on a commodity-centric economic model.
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Which factors will evaluate the success of the ViAT implementation?
On one hand, governments must issue clear direction for organizations on what their VAT consistence obligations are and how they should meet them. Governments ought to guarantee a positive discount framework, so organizations don’t experience the ill effects of capital difficulties. Then again, organizations must invest enough energy and time with their tax advisors to see how VAT will affect them and execute the correct strategies, methods, and frameworks to guarantee full consistency.
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What should be learned from the VAT experiences of Arab countries like Egypt?
The main objective of the VAT is to generate a consistent revenue stream for governments. In the event of Egypt as the latest example, a lesson to be gained from that point is the significance of obviously conveying major legislation change ahead of time to the market. Egypt presented VAT on the eighth of September 2016 and to date; the business group is as yet confused on specific parts of the law, because of the way that the VAT official direction has not yet been distributed. The exact opposite thing you need as an administration is to put organizations in danger of resistance since they don’t know about or confuse toward the new tax legislation.
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Mention sectors which will be affected by VAT and why?
All departments will definitely get affected by VAT. No matter you are in the VAT domain or not. VAT will affect all industries and all departments within organizations. People might think of VAT as a problem specifically for the finance department to solve. However, all neighboring departments will feel the ripple effects – from operations to human resources. Industrialists financial services and education are in the same boat, every sector will be affected.
