VAT is charged at each step of the 'supply chain' and consumers generally bear the VAT costhttps://www.youtube.com/embed/GT8atNnN4z0?vq=hd720&showinfo=0&rel=0&fs=1&modestbranding=1&autohide=1&color=white&theme=light
Dubai: After a year-long rigorous preparations, the Value Added Tax (VAT) has gone live today morning (Monday, January 1, 2018), supported by a robust legal frame work, necessary regulations and a competent tax authority to implement the all new tax regime.
While VAT is applied at a uniform rate of 5 per cent on taxable supplies, a number of goods and services are either zero rated or in exempt category in the UAE, reducing the overall inflationary impact. However, it is true that VAT will reduce the purchasing power of UAE residents in proportion to tax payed on consumption.
The fact that the UAE is new to taxation, the VAT implementation has come with its fair share of apprehensions in the minds to all stakeholders. VAT is one of the most common types of consumption tax that has been implemented in more than 150 countries around the world.
VAT is charged at each step of the 'supply chain'. Final 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.
Taxation is a globally accepted practice of augmenting and diversifying government revenues. Persistent low oil prices over the past three years have brought considerable economic pressure on the GCC countries. This had led to an urgent need to diversify revenue streams.
Although most expatriates living in the UAE are used to some form of indirect taxes in their home countries, the newness of taxation here has created some amount of unease among consumers and businesses. The introduction of a new tax in a region that is used to subsidies and absence of government levies, comes with apprehensions on the mechanics of implementation, impact on the economic growth and inflationary pressures.
As for business that are integrating VAT into their invoicing, accounting and auditing systems, it is likely to come with some amount of initial hickups until people get used to the new system.
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