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Why United Arab Emirates(UAE) is Implementing VAT?

Why United Arab Emirates(UAE) is Implementing VAT

What is VAT?

VAT – Value Added Tax is general consumption tax collected fractionally at every stage of value addition to goods or services. As of 2016, more than 193 countries have implemented VAT. VAT is considered the best taxation procedure which collects tax at each stage of the supply chain process. Therefore, double taxation is completely avoided in this method. VAT is generally paid by the end consumer and businesses who involved in the supply chain process will collect the tax on behalf of the government.

Below picture explains How VAT is collected at every stage of cloth production to end consumer.

vat

What is VAT?

VAT – Value Added Tax is general consumption tax collected fractionally at every stage of value addition to goods or services. As of 2016, more than 193 countries have implemented VAT. VAT is considered the best taxation procedure which collects tax at each stage of the supply chain process. Therefore, double taxation is completely avoided in this method. VAT is generally paid by the end consumer and businesses who involved in the supply chain process will collect the tax on behalf of the government.

Below picture explains How VAT is collected at every stage of cloth production to end consumer.

vat enabled erp software

How VAT will affect people living in UAE?

UAE government have decided to levy 5% VAT – Value Added Tax for all goods and services. Therefore, the cost of living in UAE will slightly increase compared to previous years. It also depends on the life style of the family or individual. Example: Assume a person spends AED 5000 for luxury products in the year 2017 will spend AED 5250 for the same products in 2018. However, there are exemptions for certain essential category like education, healthcare and food items.

How government will collect the VAT from consumers?

Businesses on behalf of government collects the VAT and pay to the government. Seller will collect the VAT from buyer when goods or service sold, then the seller will deduct his/her input VAT credit and pay the remaining to the government. Brainsphere IT Solutions helps companies to implement VAT Enabled ERP and VAT Compliant Accounting Software in Dubai, Abu Dhabi, Sharjah, Ajman and other Middle East countries to make the business transactions and tax filing simple and quick.

Conclusion

The citizens and residents of the UAE enjoying the best in the world infrastructure for a long duration of time. The government took the responsibility and provided the best public services to the people from government’s budget. Now it’s time to pay back to the nation that served the people without any expectation like rain. This new policy and taxation system will bring more public participation and responsibility to the citizens and residents of UAE. Change is inevitable and it always shapes one better. Let’s get ready for the new morning on 1st January 2018.

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