The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, has issued the Federal Law No. 7 of 2017 for Tax Procedures. The Tax Procedures Law covers tax procedures, audits, objections, refunds, collections and obligations, including tax registrations, tax-returns preparations, submissions and payments. The law is applicable for the VAT procedures starting from 1 January 2018.
The main points of the Tax Procedures Law are the following:
Keep records: Every business must keep accounting records, commercial books, invoices and other documents for minimum 5 years.
Learn Arabic: Any documents related to tax must be submitted to the authority in Arabic. Nevertheless, the authority is free to accept any other language and can request an Arabic translation.
Be aware of tax audits and penalties: The authority can perform an audit on anyone regarding the compliance with the federal tax legislation. Furthermore, penalties can and will be imposed for tax evasion, not paying tax, late tax report submissions or an unentitled refund of tax etc.
Nevertheless, the UAE VAT Law has not been officially published yet, but is expected very soon. However, from 1 January 2018 a 5 % VAT will be charged on most goods and services in the UAE. VAT implementation requires a meaningful change to business operations and will have a severe impact on the company’s cash flow, staff requirements, accounting procedures and data storage.
Businesses should prepare for VAT now by doing the following:
1. Understand the likely impact of VAT
2. Recognize VAT registration obligations
3. Maintain relevant books and records
4. Ensure that VAT becomes a cost to customers
5. Make certain that VAT is paid and quickly recovered
6. Provide accurately accounting for VAT
7. Revise enterprise resource planning (ERP) systems
8. Implement manual VAT accounting processes if no ERP
9. Modify invoice templates and include VAT
10. Avoid unnecessary cash flow or absolute VAT costs
A business must register for VAT if its turnover exceeds 375,000 AED. Furthermore, a business may choose to voluntarily register for VAT if its turnover exceeds 187,500 AED. The online VAT registration is expected to start from mid-September 2017. If you have additional questions or require more information about VAT and your ideal VAT preparation, please do not hesitate to contact our MEO competence team.