VAT Full Form : Value Added Taxes
Introduction of VAT Full Form :
The introduction of VAT will significantly change business accounting operations. Today will explains the basis VAT and it is impact on business and consumers.
Definition of VAT Full Form :
UNIFIED VAT AGREEMENT (UVAT) is a framework agreement signed by all six GCC countries. This structure contract sets out the underlying principles of VAT laws for the six GCC countries. Member states retain some flexibility, such as how to treat heath care, education and free zones for VAT purposes. The KSA and UAE are amount the first GCC member states to introduce VAT, with a effective date of 1 January 2018.
VAT full form : VAT would be charge the standard rate of 5%. There are positive supplies and services which can subject to zero rate or under exempt categories.
The VAT is a Tax on the consumption goods and services, levied the point of supply and is not planned to be a tax on business. VAT is collect by registered suppliers down the supply chain and remitted the government.
The VAT would governed by Federal Tax authority (FTA). It will be responsible for collecting taxes and reviewing the compliance. The responsible for conducting Tax audits and administering penalty.
VAT Full Form Scope of Tax :
Tax shall be imposed on :
1. Every taxable supply and Deemed Supply made by the Taxable Person.
2. Import of concerned Goods except as specified in the Executive Regulations of Federal Decree-Law no (8) of 2017.
1. Compulsory registration for turnover over AED 375,000. Voluntary register for revenue over AED 187,000
2. Registration opens from Oct 1 2017 and deadline is DEC 31st 2017. Voluntary early registration allowed from July 1st 2017.
VAT Registration : Turnover Calculation
For the purposes of Voluntary VAT Registration :
Only taxable supplies are counted.
A person may taken into account tax able supplies or expenses which were subject to VAT threshold.
VAT Rates / VAT Full Form:
The VAT rate is 5% for most goods and services except for these exempted or 0% tax categories.
Certain education and healthcare supplies.
Goods and services exported outside the GCC.
Certain investment grade precious metals (eg : gold and silver of 99% purity).
Newly constructed residential properties sold within 3 years construction.
VAT Exempt / VAT Full Form:
Certain financial services.
Need for bookkeeping :
The VAT rule will lead to most important changes for business account preservation. Businesses that get together the minimum annual turnover requirement must register for VAT. Business not registered for VAT full form should maintain their financial records in any event, in case the government needs to establish whether they should be registered. The Every business owner registered under VAT must maintain the following records.
An invoices is document which records the details of a taxable supply made. Only VAT registered business are authorized to issue tax invoices. The receipt of a valid tax invoice is the primary documentary evidence to support the purchases VAT full form recovery. Apart form invoice issued for supplies made, business owners must issue separate invoices for purchase made from vendors or suppliers.
The valid tax invoice should include the following information :
A unique sequential number
The date of issue.
The supplier name, address and Tax Registration Number (TRN)
The customer name, address and Tax Registration Number (TRN)
Description of goods or services supplied.
Total amount excluding VAT
Total VAT Chargeable.
Price and quantity for each item.
Rate of discount per item.
The Rate of VAT charge each item, if an item is exempt or zero rated, then declare there is no VAT on these items.
Total amount including VAT.
These steps to identify if VAT is applicable :
Place of supply of Goods
Place of supply of services
Date of supply of Goods
Date of Supply of Services
Business : Any activity conducted regularly, on an ongoing basis and independently by any person, in location such as industrial, commercial, agricultural, professional, service or excavation activities or anything related to the make use of of tangible and intangible property.
Taxable Supply : A supply of goods or services for a consideration but a person conducting business in the State. Supply can be either under zero percent or at standard rate of 5% deemed supply, and does not include exempt supplies.
Place of supply : It will determine whether a supply is made in the UAE or outside the UAE for VAT purpose :
If the supply is determined make in the UAE : VAT must applicable.
If the supply is determined make outside the UAE : VAT is not applicable.
Date of supply : It will determine when to account for output VAT on supplies. Consideration : all that is received or expected to be received for the supply of goods or services, whether in money or other acceptable forms of payment. It will determine value of supply on which VAT is to be charged.
Place of supply for Goods :
Place of supply rules will decide for a supply is prepared in the UAE or outside the UAE for VAT purposes :
If the supply is treat as made prepared the UAE : No UAE VAT will charged.
If the supply is treat as prepared in the UAE : VAT may charge.
Domestic supplies (B2B B2C) :
If the movement of goods is within the UAE, then subject to the applicable VAT rate in the UAE – standard or 0 rated.
Example : Company A in Dubai delivery goods to company B in Abu Dhabi. Place of supply will UAE there is no supply of goods outside the UAE.
Exports to implementing GCC state :
Place of supply is the other implementing state (e.g KSA) provided the customer is registered for VAT in the that GCC state, and the goods are exported outside the UAE and consumption is in that state. If the that the customer is not registered for VAT , then the place of supply is UAE.
Example : The company abc in dubai delivers goods to Company A in saudi. Place of supply will saudi, if the company A is tax registered as per VAT law of saudi. In this case as supply of goods is outside dubai I.e Saudi place of supply will saudi.
Exports outer the GCC and to Non implementing to GCC State :
Place of supply will dubai but VAT will charge at the 0 rate.
Example : company A in dubai delivers goods to company B in America. Place of supply will be UAE, but VAT will be charged at zero rate as any supply of goods outside the implementation state will be considered as an export and will be subject to zero rate.
Import into UAE :
Place of supply is the UAE and the recipient account for VAT under the reverse charge mechanism.
Example : The company Abc in America delivers goods to Company B in Dubai. Place of supply will be dubai as per the RCM. VAT will account at standard rate by the consumer of the goods I.e Company B provided B is tax register in dubai. Company B will the account for VAT on its normal VAT return and will able to claim that VAT reverse on the same return, subject to normal VAT improvement rules.
Conclusion Of VAT Full Form: