VAT Accounting Services

Tax is a measure by which Government raises income to pay for public administrations or services. The United Arab Emirates launched its Value Added Tax (VAT) decree-law on 27th August 2017, facilitating the implementation of VAT on 1st January 2018. VAT is a form of Indirect tax imposed on goods and services that are bought and sold. The Introduction of VAT by the Government of UAE is also a move towards its vision of lessening dependence on oil and petroleum products as a source of revenue. And importantly it is contemplated to be a more refined path to taxation as it makes business serve as tax collectors on behalf of the Government and cuts down tax evasion.

An Overview

The rate of VAT is 5% and it is implemented on a host of products but certain business zones were excused from it, such as healthcare, education, and basic consumer goods. The execution of this VAT system is not only to regulate tax but to provide better performance for the businesses and also to reduce the operational costs for the same. VAT is also known as destination-based tax depending on the region.

Key Elements of VAT

Registration: A business must register for VAT if the value of supplies exceeds the registration threshold of AED 375,000 in the preceding 12 months. Businesses can voluntarily register for VAT if the value of supply exceeds AED 187,500.

Import Tax: Tax is collected on the import of goods since it is supplied within the UAE.

VAT Reporting: Registered businesses must report the amount of VAT they have charged and paid to the Government.

Goods & Services: VAT is collected on the supply of goods and services as per the decree law.

Tax Invoice: It is an important document as it records all the applicable tax details of the supplies.

Estimate: There are several measures on which the value of the tax is levied. These specific measures are backed by executive regulation to deal with profits, discounts, vouchers, etc.

Implementation: When the companies implement VAT in their accounting process, it will affect the cost part of the business, updation of IT systems, and supply contracts.

Tax-free zones: UAE cabinet has defined some free trade zones as designated zones where the transit of goods and services will be tax-free through these zones.

VAT Accounting in UAE

Accounting is the procedure of maintaining monetary transactions pertaining to a business. It is a vital part for almost any business to perform with ease, accuracy, and transparency. It could be taken care of by a bookkeeper for smaller firms or a certified accountant for larger organizations. The reports generated by them are priceless in assisting the management in important business-related decision-making. The implementation of VAT in the UAE did make an impact on the way organizations work and so the importance of accounting services is gaining among the business family.

VAT accounting permits you to quantify and anticipate the growth of your business while following the resources, liabilities and pay. The VAT law commands each available individual to keep up books of records, which should be saved for at least five years. As to organizations working in UAE, the accomplices and investors should guarantee that the books of records do follow the arrangements of VAT law. It is additionally prudent to keep an electronic duplicate of the original accounting records.

VAT is a Transactional TAX and its Procedures include;

Monthly Bookkeeping: The business should provide the required records to Federal Tax Authority (FTA) as per the Tax Procedures Law on a periodical basis

VAT Recording & Reporting: this supports the vat return process by listing all the information process related to a company’s business.

Financial Reports: Fully audited financial reports are prepared in accordance with International Financial Reporting Standards (IFRS)

Inventory Management: systemic approach to find the right stock in right levels at right cost

Keeping up and maintaining records in a precise and opportune way will enable a smooth and clear VAT return process. Addressing a professional consulting agency that can deal with the whole VAT accounting process expertly, is the most suitable alternative.

Our company Carvy Management Consultants with a team of qualified, professional VAT consultants who work towards the client’s goals and requirements will help you in all VAT-related queries with maximum expertise. We will understand your model of business and thoroughly scrutinize the effect of VAT on your business according to the regulations and compliances in UAE.

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Pradeep Balakrishnan, Manager

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