Value Added Tax (VAT) is an indirect tax levied on goods and services. In order to replace Sales Tax, VAT is generally used to reclaim the VAT they have paid while trading goods and services. The VAT came into effect in the UAE, a part of GCC countries on Januray1, 2018. Organizations in the UAE eligible for VAT were anticipated to implement the new law at the earliest. The member nations of GCC like Kuwait, Oman, Qatar, Bahrain, and KSA were also expected to implement the VAT system simultaneously and signed an agreement recognized as Unified VAT Agreement (UVAT). The current proposed rate of VAT is 5 %, nevertheless, this rate may vary with the revision in law. It is a must for business owners to get their businesses registered if their turnover amount exceeds AED 375,000. VAT provides a new source of income to the UAE that is continued to be utilized to deliver high-quality services. It is implemented by the Federal Tax Authority (FTA) to support law in the UAE. Businessmen in UAE are recommended to maintain their business records to accommodate VAT. Alankit Management Consultancy offers reliable VAT Accounting services for start-ups and established companies of all sizes across UAE.
VAT Accounting in UAE requires numerous procedures within a business. For instance, VAT registered business needs to organize separate ledgers for sales, taxable export sales, zero-rated export sales, etc. The need for VAT accounting arises because VAT is a transaction tax and it demands separate ledgers to be prepared based on taxes. Below mentioned are the reasons why VAT comes in light:
VAT registered businesses are always advised to reorganize their business records to serve as an updated source of financial information of a business. When there is a lack of control on VAT accounting services like identifying, recording, categorizing, & communicating financial information, it may affect the VAT return filing & financial statements of a company. The unorganized & inaccurate information about VAT accounting can lead to heavy penalties. The standard rate of VAT charged on goods & services is 5 %. Goods and services include food & beverage, electronic gadgets, construction, entertainment facilities, apparel, automobiles, etc. There are categorized goods & services where VAT is levied at a 0% rate. Items covered under zero rate VAT are international transportation of goods & services, residential properties, specific healthcare & education services, charitable buildings, the supply of specific transport, etc. The government has laid exemption on certain goods and services that include bare land, financial services, local passenger transportation, etc. Alankit offers an exclusive variety of services related to VAT accounting and ensures that the procedures meet VAT audit and other tax requirements of a company.
VAT Accounting offers benefits that appeal to customers to get VAT registered & enjoy the benefits of VAT Accounting. The ability of VAT accounting cannot be overlooked because it provides the company with access to important documents associated with tax filing at a single place that makes the tax return filing process easier for the company. It allows the authorized people to keep a track of all the VAT records and ensure all the tax-related documents are verified & submitted. Since the VAT data will be all organized & recorded, the chances of tax auditing can be lowered for the company.
There are no set rules or tips for VAT accounting, nevertheless, a certain system of keeping the VAT accounting go smooth can work best. For example, Alankit follows a systemized way of keeping records that in an event of an inspection, businesses can track any information they want from invoices to receipts & everything essential. Important documents like copy of submitted VAT returns, VAT registration certificates, etc. should be categorized and kept in separate files. Small businesses with fewer tax transactions can maintain their tax records in a spreadsheet. Safe and secure accounting software should be used for protection against any destruction or accidental data loss. Creating a record of sales also gives a better picture of VAT accounting managed efficiently.
There are multiple reasons that you may want to know while choosing our services: