The value-added tax (VAT) system in the UAE will not only have an effect on the end-user, consumers and buyers but will also have a wider impact on commercial establishments and businesses in UAE. A GCC-wide VAT implementation that has been proposed from January 2018, and has questioned the readiness of businesses, in terms of cost of doing a business, applicable tax regimes, implementation of the taxation system, change in the commercial law and several other such reasons.
It is true that VAT in UAE will affect practically on all the functions within a business, along with human resources, finance, purchase and procurement, information technology, marketing, etc. For smaller companies in UAE as well as the SME population, tax executing and transforming of their regularities will be the root, as they aim to adapt with the tax management in the following months. On the other hand, the larger organizations and multinational companies will already be accustomed to the tax systems, as they have been dealing the countries from around the world.
But this is not it, here are some of the effects that businesses might have due to the implementation of VAT in UAE:
- Companies need to acquire knowledge in terms of how to apply the levy VAT on their commercial activity in UAE.
- Businesses in UAE may readily get acquainted with the new tax system or renovate their financial structures.
- Businessmen will have to reconsider their suppliers to determine the impact of VAT on the goods/products/ services in which the company deals.
- Whether or not it's necessary to invest in additional manpower to facilitate tax collection is another area to look into.
- Also, businesses have the possibility of sharing the taxes with the mid-traders, supplier as well as the consumer. For instance, if the 5% VAT is proportionality divided, the implication of the VAT would not be that burdensome.
- Compared to other countries the level of tax in UAE and the taxation procedures and policies are kept approachable – thus it would not be a huge change for the companies.
- For SME’s it is crucial to apply VAT correctly or it may become an additional cost to the business.
- Another important effect is that businesses must evaluate their current contracts to regulate if VAT has been suitably addressed.
- Businesses must reconsider their business structures and commercial modules which may no longer be applicable as a result of the introduction of VAT in UAE.
- Businesses and commercial institutes will have to keep an account for the VAT and submit the regular reports and filings to the government.
If you are still having trouble in dealing with the changes due to VAT in UAE or want to know the tax advantages of business setup in UAE in comparison to any other countries, speak to one of our tax consultants at Shuraa Tax Consultants and we will guide you through the needful.