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Introduction of VAT in the Countries of Gulf Cooperation

Introduction of VAT in the Countries of Gulf Cooperation

The countries of Gulf Council which include the UAE, Oman, Saudi Arabia, Qatar, Bahrain and Kuwait are introducing Value Added Tax equal to 5%. This decision will come into force on January 1, 2018 in the UAE. The rest of the countries have to introduce VAT on their territory until January 1, 2019.

Introduction of VAT in the UAE – Important Information

Currently, the law governing the introduction of VAT has not yet been published. Therefore, it is not yet clear who will be subject to VAT and which legal entities and individuals will be exempted from it. The second important question which is yet to be answered is related to free trade zones and companies situated there. As soon as the regulations are published, each of these issues will be properly addressed.

However, there are some things that are already known. The collection of VAT in the UAE will be regulated by two main laws – Tax Procedure Rule and the Law on Value Added Tax. While the first one is the base for fiscal law and underlies the foundation of taxpaying in the UAE, the second law deals specifically with VAT. Currently, both laws are still being progressed and particularized.

Who is subject to VAT registration In the UAE?

There is one important thing you have to be aware of concerning VAT introduction. Some companies will be subject to obligatory VAT registration, while for other companies it will be optional according to the Ministry of Finance of the UAE.

How to determine which of the two categories do you belong to?

If the annual turnover of your company is more than 187,500.00 dirhams, then VAT registration is obligatory. For the annual turnover more than 187,500.- dirhams, VAT registration is optional. Thus, the necessity of VAT registration is predetermined by the annual turnover of the company. Important – this info is based on the presently available data and is not finally confirmed by authorities.

How to contest unlawful tax collection?

This is another important issue that is of great interest to businessmen. If by any chance you’ve become a subject to unlawful tax collection or assessment you have to know how to deal with it. In order to be armed against it, you have to follow these simple steps:

  • Send a request to the corresponding authorities within 20 days after you receive tax assessment you consider unlawful;
  • If the authority you’ve sent your complaint to insists on the amount of money specified in your assessment, send it to another authority for re-evaluation;
  • If the second authority insists that the assessment is right, you can apply for litigation.

Introduction of VAT in the UAE – Summary

The introduction of VAT in the UAE needs comprehensive preparation by the authorities. Though the law will come into force only in 2018 and has not yet been published, entrepreneurs have to be aware of its main requirements in order to be ready for any changes or potential difficulties. To know if you are subject to VAT registration, it is sufficient to assess your annual turnover. If it exceeds 187 500 dirhams, then VAT registration is required.

Whereby the UAE offshore companies would not be subject of any VAT as they have all their activities outside of the country.

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