Law will force companies to adapt their operations according to new requirements so they will have to analyze the impact that will occur in the different departments of the company. Some of the most immediate effects will be the adaptation of commercial contracts and invoices, the declaration of taxes and the obligation to store accounting documents for 5 years.
Special considerations of VAT Consultancy Services:
- There are issues in the law that deserve special consideration, such as free zones, VAT groups, and uncollectible debts. These points, of great relevance, still need concretion through the aforementioned regulations.
- RLD has indicated that it works to be able to offer the best advisory service in this field and inform about all the news that may be produced. For this purpose, it has created in its offices in the United Arab Emirates a specific support department for the implementation of VAT, with which it will be possible to request any type of help or information that is needed.
- Not only the UAE but all the countries of the Gulf Cooperation Council (GCC) follow this rule, which also includes Saudi Arabia, Bahrain, Kuwait, Oman, and Qatar. We are talking about a 5% tax rate that will be applied to the sale of the majority of goods and services: not in all cases, we will see later what the cases of exclusion will be.
- First of all, VAT consultants need to understand how VAT will affect the business and their operating model and, if they realize they are not equipped internally to cope with this change, they should make substantial changes in the area of finance and control, including new specialized professionals and new technology. The mandatory accounting entries are introduced, which will be subject to checks, so it will be essential to rely on the assistance of highly experienced professionals specialized in the field.
Very high sanctions will certainly be applied if it is non-compliant, even compared to the standards used in other countries, and for this reason, it is fundamental for companies to correctly implement the new tax system and the new procedures
This is a radical change for both consumers and companies and the questions that might arise to those who live and work in the UAE (or those who are planning to move there) are many.
The motivation makes sense: the UAE needs to strengthen its income base to break away as much as possible from oil and its price instability, continuing the commitment to differentiate the domestic economy. The fact that in the UAE individuals and companies are not nearly taxed has always depended on the fact that it is the oil companies and credit institutions that are subject to a tax levy on income, 55% for the former and 20% for the latter. However, the problems connected with the instability of the oil price have convinced the emirate rulers to take the road of the introduction of VAT to allow the ambitious projects and investments of the country to be carried out, even without the oil revenues of the past in social sectors, such as health, the environment, culture, and infrastructure, in line with the UAE Vision 2021 program “.
The introduction of VAT will inevitably affect final consumers; therefore, prices will be predicted to increase in 2018, albeit limited, which could cause an inflation effect.
The possibility exists, but not in the immediate future, as they are still under study. However, the Ministry of Finance has specified that no form of personal income tax is currently envisaged.
If your business supplies goods or services that are subject to VAT (included with zero rates), you have the right to deduct VAT on the costs incurred. If instead you conduct a business exempt from VAT and cannot, therefore, recover it on the costs incurred, VAT will represent a cost for your business, as your suppliers will apply the VAT that you will not be able to recover. At this point, it becomes fundamental to analyze the situation with the support of specialized professionals on a case-by-case basis and verify the best way to be ready and not passively suffer the impact of VAT, always in full compliance with the law. In some cases, a radical revision of the juridical-corporate structure may be necessary, to make it adequate to the fiscal and business needs.