VAT is about to be coming into effect from 1st January 2018. The VAT rate is trimmed down to the standard rate of 5% unless explicitly put under the exempt category. It is one of the most common types of general consumption tax and has been successfully implemented in different parts of the world. Value Added Tax is an indirect tax that is collected incrementally, based on the value added, at each stage of production or distribution or sales. According to the recent report of a leading financial institution showed that majority of the companies are ready to implement VAT in the UAE. But the question is among the SMEs how many are ready to implement VAT in their businesses. In this article, we brief you about all the points that have to be taken into consideration once VAT becomes operational.

The Federal Tax Authority (FTA) has announced that they would be introducing the phased registration approach. Businesses are segregated on the basis of their annual turnover and here are the respective deadlines for VAT registration under different slabs :

Businesses with an annual turnover exceeding AED 150 million must apply for registration by 31 October 2017

Businesses with an annual turnover exceeding AED 10 million must apply for registration by 30 November 2017

Remaining businesses with an annual turnover exceed the mandatory registration threshold (expected to be AED 375,000) must apply for registration by 4 December 2017

FTA is also providing “Getting Started Guide”  prior to the fulfillment of the VAT registration form that highlights and gives important information that businesses need to be aware of pre-filing the tax. These include details about the registration criteria, registration of a VAT group, and necessity to register if only zero-rated supplies are made.

According to the  FTA, there will be primarily two kinds of invoices for VAT in the UAE. Supply for less than the specified amount will be considered to maintain a simplified VAT invoice – specifically for supermarkets and retail industry. However, supply for more than the specified amount will have to make a detailed invoice.

Simplified VAT invoice for supply less than the specified amount should consider the below:

• “tax invoice” in a prominent place
• Name, address & TRN of supplier
• Date of issue
• Description of goods or services
• Total amount payable
• Total VAT chargeable

The VAT invoice for supplies above than the specified amount should consider the below:

• “tax invoice” in a prominent place
• Name, address & TRN of supplier
• Name, address & TRN of recipient (where they are a registrant)
• A sequential or unique identifying number
• Date of issue
• Date of supply if different to the date of issue
• Description of goods or services
• Unit price, quantity or volume supplied, rate of tax and amount payable in AED
• Value of any discount offered
• Gross value payable in AED
• Tax amount payable in AED
• Statement relating to reverse charge if applicable

Businesses that fall under the slab of tax applicable range will have to set up an online account with the Federal Tax Authority (FTA) website and fill the VAT registration form and submit it online.

VAT registration guide is also provided for all the additional details clarifying the VAT registration process and FAQs related to VAT. Under the “Advice” tab, one can access the supporting document. This document states the calculation of turnover for VAT purposes, a walk-through video guide, and to ensure tax compliance, registration of a VAT group and types of books and records required to be held by a taxpayer is also provided.

Under UAE VAT law, it is compulsory for each and every taxable person to maintain books of accounts. Also, the authority can ask for additional documents such as annual accounts, general ledger, purchase day book, invoices issued, invoices received, credit notes, debit notes, VAT Ledger etc.

Under the UAE VAT law, the books of accounts and records are to be maintained for five years.

For the easing up the process and enabling knowledge source, it is preferably advised for businesses to visit the FTA website and initiate their VAT registration application by their applicable deadline after having considered the guidance provided by the FTA and other advice as required for instance services such as VAT Grouping. Businesses need to allocate time to compile the required information for the VAT registration.