CA Deepak Bharti | Nov 25, 2018 |
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Introduction of VAT in UAE :GCC i.e. Gulf Cooperation Council is a political and economic alliance of six middle eastern countries- Saudi Arabia, Kuwait, UAE, Qatar, Bahrain and Oman. The GCC was established in Saudi Arabia in May 1981. The objective of the GCC is to achieve unity among members based on their common objectives and their similar political and cultural identities. In line with their objective the GCC has come up with a unified agreement for VAT which sets out the framework under which VAT can be implemented in each of the GCC member states. Each member state can draft its own local law and implement VAT. The framework paves the way for implementation, allowing standard rate of VAT to be charged on most of the Supplies made within the GCC member states implementing VAT, with certain supplies of goods and services zero rated or VAT exempt to member states.
GCC countries have always been highly dependent on oil, the largest revenue contributor to most of these countries economic growth. The region has witnessed an acute deterioration in its external and fiscal balances over the past three years primarily due to weak oil prices. Although large fiscal buffers provided some cushion to GCC countries, sustained weakness in oil prices has forced the Gulf nations to adopt a series of reforms. Considering all the above issues, GCC countries plan to introduce a Value Added Tax (VAT) of 5% in January 2018 in a bid to increase government revenue which will be a steady revenue rather than volatile. According to IMF, revenue from VAT would contribute 2.1% to the UAEs GDP. Qatar and Kuwait are expected to generate around 1.1% and 2% of the GDP, respectively, through the implementation of VAT.
Under VAT law types of supply can be mainly categorized into exempt and taxable supplies. Taxable Supplies are under 2 categories i.e. Standard Rated i.e. @ 5% and Zero rated supplies.
A person making only exempt supplies cannot register for VAT as the person is not providing taxable supplies as per the VAT Act.
The Following Supplies shall be exempt from Tax:
No registration is required under this Decree-Law for a business engaged in providing fully VAT exempt supplies. However, in case of business which makes partly exempt supplies and partly taxable supplies, the business registration provisions will apply accordingly for taxable supplies and threshold will be computed accordingly. Any person registered or obliged to register for Tax purposes is termed as taxable person.
No returns are required to be filed under this Decree Law by fully exempt business. However, in case the person is carrying on partly exempt and partly taxable supplies, the Taxable Person is required to submit tax returns for each specified period containing all information and data as specified about supplies of all kinds (Including exempt supplies) provided during the relevant period and details of Input VAT reclaimed
The following items are subject to zero rates:
These are items which fall beyond the ambit of Supply boundary and hence, are outside the scope of UAE VAT Decree-Law:
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About Author
Author of this article is CA Deepak Bharti who is member of ICAI. Currently he is working as partner in M/s N A V & Co. Chartered Accountants, handling the Corporate Compliance and Legal Department. He can be reached at [email protected]. Suggestions/comments are most welcome.
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