This is where we expect to address most of your queries about us and our services along with questions that you may have on the proposed Value Added Tax (VAT) implementation in U.A.E.
VAT related FAQ are based on information available at Ministry of Finance (MOF) website on the subject matter. There is scope for delays in update of the VAT related FAQ in relation to MOF website. You are requested to be guided by information at MOF website at all times.
Overture FAQ (Scroll down for VAT FAQ)
WHAT IS THE CONSTITUTION OF OVERTURE ACCOUNTING AND BOOKKEEPING LLC?
We are a LLC registered with Department of Economic Development in Dubai mainland, with primary approved activity of Accounting and Bookkeeping.
How are the Accounting services delivered?
We evaluate your accounting requirements and provide you with a quotation. Once post discussions the method of delivery and pricing is agreed, we sign a contract with you to maintain your books of accounts. The contracts are usually for 12 months, with option to renew as well as terminate at either parties discretion with adequate notice.
WHO DOES OUR ACCOUNTING?
We are an accounting firm with professional, qualified and experienced accountants on our payroll / visa / retainership. They perform your accounting either on your premises or off-site as per the contract. We work as independent part-time accountants for your business on a contractual basis and not as employees. In case, your business requires a full-time accountant, we can still provide the same under a contract on an outsourced basis. This is expected to reduce your cost and management time for accounting resources.
DO I HAVE TO INVEST IN AN ACCOUNTING SYSTEM
As business it is your choice as to have an in-house system for accounting, we are open to working with any accounting system as the basics of accounts are same for all the systems. However, we also provide you with a choice of maintaining your accounts on our systems. This reduces your cost and also frees up time involved in regular back-ups of your accounting data. We are partners with several FTA certified cloud based software providers (ZOHO Books, Focus, Align), this enables us to offer you a lower rate for our services as we can provide you with off-site services which costs us lesser than onsite accounting services.
HOW DO YOU BILL US?
Depending on the contracted activity we raise invoices. The contract clearly states the payment terms. Activities like set-up and backlog invoices are raised on completion or after a contracted period. The monthly accounting services are invoiced monthly on the basis of calendar months.
WHY DON'T YOU CLEARLY STATE YOUR RATES OR SERVICES ON YOUR WEBSITE?
We have clearly published our base price with riders. Accounting services are dependent on the volume of transactions to be processed along with the complexity or nature of transactions that a business has. This makes "one size fits all" kind of pricing unfair for SME and Start-ups. While we do have standard rates for our calculation, we evaluate each customer requirement and provide a discounted rate or premium rate form our standard rates based on the work involved.
What is VAT?
Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.
VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.
How will the government collect VAT?
Businesses will be responsible for carefully documenting their business income and costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.
Who can or will be able to register for VAT?
A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.
What are the VAT-related responsibilities of businesses?
All businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case we need to establish whether they should be registered.
VAT-registered businesses generally:
- must charge VAT on taxable goods or services they supply;
- may reclaim any VAT they’ve paid on business-related goods or services;
- keep a range of business records which will allow the government to check that they have got things right
If you’re a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online.
If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.
What does a business need to do to prepare for VAT?
Concerned businesses will have time to prepare before VAT will come into effect in January 2018. During that time, businesses will need to meet requirements to fulfill their tax obligations. Businesses could start now so that they will be ready later. To fully comply with VAT, The FTA believes that businesses may need to make some changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g., accountants and tax advisors). It is essential that businesses try to understand the implications of VAT now and once the legislation is issued make every effort to align their business model to government reporting and compliance requirements. The FTA will provide businesses with guidance on how to fully comply with VAT once the legislation is issued. The final responsibility and accountability to comply with law is on the business.
What sectors will be zero rated?
VAT will be charged at 0% in respect of the following main categories of supplies:
- Exports of goods and services to outside the GCC;
- International transportation, and related supplies;
- Supplies of certain sea, air and land means of transportation (such as aircrafts and ships);
- Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
- Newly constructed residential properties, that are supplied for the first time within 3 years of their construction ;
- Supply of certain education services, and supply of relevant goods and services;
- Supply of certain Healthcare services, and supply of relevant goods and services.
What sectors will be exempt?
The following categories of supplies will be exempt from VAT:
- The supply of some financial services (clarified in VAT legislation);
- Residential properties;
- Bare land; and
- Local passenger transport
When are businesses supposed to start registering for VAT?
What are the penalties for not complying with a business’s VAT responsibilities?
Where can I find the official information on VAT for U.A.E
The Federal Tax Authority is the designated authority for the implementation and management of VAT in the country. Their website is tax.gov.ae , the details of the law are available on the site under the section Legislation .