Value Added Tax (VAT)

What it is
Value-added tax (VAT), also known as goods and services tax, is an indirect consumption tax imposed on goods and services that are either bought or sold.

VAT is to be applied in the UAE at a 5% rate starting January 1st, 2018 with certain exceptions. VAT will provide a new source of revenue that ensures the delivery of high quality public services.

How it affects your business
In addition to compliance requirements for reporting, VAT will have a direct impact on your business cost structure, which will eventually mean impact on profit margins.

First compliance step is registering for VAT in UAE, which is mandatory if your business’ taxable supplies exceed AED 375,000. If your business’ supplies and imports are less than the above but exceed AED 187,500, you can voluntarily register.

To fully adhere to VAT, you might have to apply certain changes to your pricing methodology and strategy, business’ operations, financial management, and so. Businesses should understand the impact of VAT so as to be ready for when legislation is issued in order to comply with the government’s requirements.

Business’ VAT-related responsibilities:

  • Record financial transactions and make sure financial records are accurate and up to date
  • Charge VAT on taxable goods or services
  • Keep business records as to allow the government to ensure things are right
  • If you have charged more VAT than paid, you have to pay the difference to the government, and if you have paid more VAT than charged, you can reclaim the difference
  • Ensure that your company’s ERP is equipped to capture the above and able to report and produce required VAT reports

Why XB4
A reliable VAT consultant in Dubai, and the UAE, we at XB4 will ensure a smooth transition for your business when registering to VAT and will help you adapt to the changes by identifying the impact of VAT on your business, in addition to:

  • Creating a VAT implementation strategy
  • Identifying and preventing tax risks
  • Managing tax accounting issues
  • Meeting compliance obligations
  • Training staff and executives on dealing with and planning VAT and its impact on the business and pricing
  • Developing roadmaps and a resourcing plan to identify the work necessary for regular reporting and submission of required VAT returns


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