Adding Value with Value Added Tax (VAT)

Value Added Tax (VAT) is a type of General Consumption Tax that is collected additionally, based on the value added, at each stage of production and is usually implemented as a destination-based tax, where the tax rate is based on the location of the customer.

From 1st January 2018, UAE will start implementing a Value Added Tax (VAT) rate of five per cent. Resulting in a lot of anxiety and fear in the minds of General Public and Business owners. People have different questions and they seek to get clarifications on the same.
It is a common knowledge that running a business in the UAE is easier than anywhere else. But, will it remain the same even after the introduction of VAT?

VAT – Advantages to the Business

Easing Business Dealings:
Many suppliers and organizations are reluctant to do business with companies and SMEs that are not VAT registered. Companies may be unwilling to deal with companies who are unable to produce a proper VAT. The advantage of voluntary VAT registration is that the company will be issued with a VAT registration number to easily deal with external businesses.

VAT Refunds:
Another advantage of voluntary VAT registration is the ability to claim VAT on goods and services purchased for the business. If a company is selling one sort of VAT Rated product (e.g. zero rated) while buying another (e.g. standard rated) the company/individual may actually receive money back in terms of VAT refunds.

Boosting Business Profile:
It is believed that starting out a small business or a new limited company can be tough to compete against the big players in the market. So voluntarily registering your business for VAT might give the impression that your business is bigger and more successful than it actually is.

Reduces Risk:
VAT reduces risk of dealing with unauthorized dealer as well as helps to be cautious about black listed dealers.

Register Now:
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About the author

FAME is a leading Accountancy training provider. FAME brings together under one roof a wide range of accounting courses blended with real world experience and practical application. FAME aims to bridge the gap between theoretical knowledge and practical challenges that accountants face in their day to day working. We provide practical workplace skills for finance staff meeting the needs of employers, bankers, government and learners, both now and in the future. Our students are integral to the success of an organisation and at the heart of ensuring the smooth running of an accounting department.