Tax is a modest word and it has the power to bring terror and fear into the hearts of every person who hears it. Is there any reason behind this madness? Numerous people dislike this word because they are unable to understand it properly. So, VAT is one of the popular tax forms applicable in UAE.
VAT (Value Added Tax) considered as the most beneficial and valuable form of taxation. More than 150 countries in the world implemented VAT. UAE has no income tax on salaries and they will remain tax-free in many ways. The country has numerous free zones which offer tax-free environmentt includes 100 percent foreign ownership in free zones.
Categories for VAT:
There are different tax categories and they are well-defined for products in electronics, smart phones, vehicles, jewelry, wrist watches, dining and entertainment. Therefore, excise duties will be applicable on numerous beverages that are considered to be harmful to heath.
Important facts about VAT in UAE:
UAE is a continually progressing economy. Globally the introduction of VAT plays a very important role. Many countries has practiced this idea. It is very important for UAE to join the line for bright future.
Boost the economy:
It has been noticed that 5% VAT which has been implemented since January; this is helping to boost the UAE economy by Dirham 12 billion the very first year.
GCC VAT system:
It is compulsory for all companies with annual revenues of over Dh 3.75 million to register under GCC VAT system. So, all companies must have to register under the same.
Different categories of VAT:
VAT (Value Added Tax) is categorized in three major sections with the inclusion of standard rate for percentage, exempt and zero rates. There exists a difference between exempt goods and zero rates. The suppliers dealing with in the zero-rated goods can regain the input VAT whereas the exempt goods suppliers are not registered and they are unable to regain the input VAT.
- Standard rate:
The standard rate of 5% is applicable on necessities like food and beverages, clothes, shoes, cosmetic products and many more.
- Exemption of Tax:
Tuition fees, medical fees, cost for surgery and airline tickets have an exemption of tax. Other government services also have exemption.
- Zero rated services:
Zero rated services include exports of goods and services. It also includes international transport of goods and passengers, building rent and other education related services.
Free zone companies:
Those free zone companies that purchase goods and services for their business outside the free zone, they are also liable to pay Value Added Tax.
There are multiple benefits of VAT, but one of the key benefits is that it will boost government revenues. Government is going to utilize the revenue from VAT collection for welfare of people. It will surely help in increasing and promoting communal stability.