Sheikh Hamdan urged businesses to expedite and complete the registration process and update their data to ensure full preparedness and compliance with the tax system as it will come into effect on January 1, 2018.
"Applying VAT plays a key role in building a sustainable knowledge economy, contributing to infrastructure for future development, strengthening public services and enhances the global competitiveness of the UAE," said Sheikh Hamdan.
The game-changing indirect tax regime, which will go into effect in the UAE and Saudi Arabia within two weeks, is a tax on the consumption or use of goods and services levied at the point of sale.
Sheikh Hamdan said the Ministry of Finance works in coordination with the FTA to ensure an easy application process for all VAT-related tax procedures. "We also put emphasis on supporting all business sectors in the country as they go through the process of VAT-related change, allowing them to apply VAT in a simplified manner through accessible and user-friendly digital systems. These measures have been implemented to avoid imposing fines on affected companies due to non-compliance with tax regulation and to support them in their financial activities."
Businesses can register for the five per cent VAT tax through the e-services section on the FTA website. However, they need to create an account first.
The impending tax regime will provide the UAE with a new source of income which will be utilised to provide high-quality public services. It will also help the government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
As a general consumption tax, VAT will apply to the majority of transactions in goods and services. A limited number of exemptions may be granted.
Tax experts said as a result of VAT, the cost of living is likely to increase slightly, but this will vary depending on an individual's lifestyle and spending behaviour. "If an individual spends mainly on those things which are relieved from VAT, he is unlikely to see any significant increase.
The government will include rules that require businesses to be clear about how much VAT an individual is required to pay for each transaction. Based on this information, individuals can decide whether to buy something."
Under the tax regime, businesses will be responsible for carefully documenting their business income, costs and associated VAT charges. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think they should be VAT registered should maintain their financial records in any event, in case the ministry needs to establish whether they should be registered.
The Ministry of Finance announced details of the executive regulations for the Federal Law No. (8) of 2017 concerning VAT, and the Cabinet resolution No. (40) of 2017 on Administrative penalties for violations of tax laws in the UAE.
VAT will be applied in accordance with the unified VAT GCC Agreement, which clarifies provisions relating to commercial transactions between GCC states. It also provides a common agreement on certain provisions such as the basic rate of value added tax and the registration limit, and gives countries discretion to choose treatment in certain sectors where it does not affect intra GCC trade.
Both the Ministry of Finance and the FTA have held a series of workshops aimed at raising awareness on the tax system and the role it plays in building a sustainable knowledge economy for future generations. The FTA has also opened the registration process through its website to provide information to taxpayers, visitors and all members of the community round the clock.
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