Dubai – 6 October 2016 : As you are aware, the UAE has proposed to introduce VAT as of 1 January 2018.The government has previously issued FAQs on VAT to assist businesses with understanding VAT. On 5 October 2016, additional FAQs were released. Below, we have reproduced the additional FAQs and provided our views on what this guidance could mean for your business.
1.How can someone access UAE Tax Law?
UAE VAT law is currently being finalized, and will be published once approved. Announcements regarding the Tax Law will be made to the press and details will be published on the Ministry of Finance website. The primary source of information regarding the UAE VAT Law is the Ministry of Finance website. We recommend that you bookmark the page and visit it frequently to stay up to date on VAT related information.
KPMG comments: This is a clear statement of intention by the UAE Government that its original announcement of a January 2018 start date for VAT remains on track. If this is the case and the VAT law is released sometime this quarter then, based on our international experience with last year’s VAT implementation in Malaysia, the time for businesses to prepare is tight. While some of you will have started preliminary preparations, having established a budget and project teams, action needs to be stepped up. For those who have not yet begun, this statement should remove lingering doubts about the inevitability of the VAT being introduced in the UAE and across the GCC.
KPMG’s Roadmap for VAT implementation may assist your own planning.
2. When are businesses supposed to start registering for VAT?
Registration for VAT is expected to be made available to businesses that meet the requirements criteria three months before the launch of VAT. Businesses will be able to register online using eServices.
KPMG comments: Businesses would be able to do online registration 3 months before the launch of VAT. However, we would expect the law to contain provisions for forming a ‘VAT group’ which can bring both cash flow and administrative and compliance benefits. A decision to form a VAT group requires careful analysis and should be done well in advance of the day registration opens.
3. How often are registered businesses required to file VAT returns?
Registered businesses will be expected to submit VAT returns on a regular basis. It is expected that the default period for filing VAT returns will be three months for the majority of businesses. Registered businesses will be able to file their returns online using eServices
KPMG comments: Majority of the registered businesses would be required to file quarterly returns and to do so electronically. This may require some systems changes to interface with the Government portal. There would be facility to file the return online. It remains to be seen what payment options will be given to businesses.
4. What kind of records are businesses required to maintain, and for how long?
Businesses will be required to keep records which will enable the authorities to identify the details of the business activities and review transactions. The specifics regarding the documents which will be required and the time period for keeping them will be communicated in due course.
KPMG comments: While specific details about how long records need to be retained are yet to be made available, the practice internationally is to require records for each transaction to be retained for a minimum of 5 years and in certain cases related to real property for up to 15 years.
Learn more about KPMG VAT services here.
To access the full information published, please visit Ministry of Finance.