VAT Registration

VAT

Value added tax (VAT) is a type of tax that is applied to the goods or services produced. It is also known as a multi-stage tax. The governments has decided to implement this types of tax to have an additional source of revenue to provide a better service to the citizens.

Enquire for VAT Registration

VAT Registration in Qatar Requirements

During 2018, it is anticipated that Qatar, along with the other Gulf Cooperation Council (GCC) member states will introduce a broad Value Added Tax (VAT) at a rate of 5%. The United Arab Emirates (UAE) and
the Kingdom of Saudi Arabia (KSA) were the first to implement VAT, as of 1 January 2018. According to the GCC VAT Framework Agreement, which was signed by all member states, the latest date for implementing VAT is 1 January 2019.

Who will be affected by the new tax?

VAT will impact most sales of goods and services in Qatar, with limited exemptions (e.g. financial services, insurance) and consumption tax relief. VAT-registered businesses will be able to claim credit for VAT paid on their expenditure, relating to their taxable business activities.

How can GM help?

GM professionals can help businesses prepare for the implementation of VAT in Qatar from a consulting, compliance and technology standpoint.

We also offer you practical solutions to address your tax needs and in depth knowledge of Qatar tax requirements. 

 With our tax professionals, we are in unique position to deal with the complexities and peculiarities of the Qatari tax system and also help you to meet the challenges of an increasingly sophisticated market.

Who will be affected by the new tax?
VAT will impact most sales of goods and services in Qatar, with limited consumption tax relief and
exemptions (e.g. for financial services, insurance). VAT-registered businesses will be able to claim
credit for VAT paid on their expenditure, relating to their taxable business activities

Who is involved?

― A taxable person: Someone who is liable for charging, collecting and paying VAT to the tax authority.
― A taxpayer: Someone on whom the final tax burden falls (i.e. the final consumer).

When will VAT be collected?
The timing of VAT collection will vary depending on the type of transaction
― E.g. importation in principle together with customs.
   Other elements may influence timing
― payment methods, e.g. prepayment
― invoice date.

What is the tax base?
The taxable amount includes everything constituting consideration obtained,
or to be obtained:
― Can be any non-monetary consideration
― Determination of what is included and not:
― taxes
― incidental expenses, such transport and insurance costs
― price discounts and rebates.
For importation of goods, customs value is used as basis, including customs duty.

VAT readiness
In 2018, it is expected that the Ministry of Finance in Qatar will announce draft VAT legislation, practical guidance and executive regulations regarding the new VAT law.
Experience has shown that businesses need significant lead time to prepare their organizations, customers, vendors and ERP systems for the introduction of VAT.

 

What does VAT
apply to?
VAT generally applies to all economic activities, divided in two categories:
The supply of goods:
― The transfer of the right to dispose of tangible property as the owner.
― The sale of tangible property.
― Occasional deeming rules – electricity, certain leases. The supply of services:
― Any transaction which does not constitute a supply of goods.
― Everything that does not qualify as ‘goods’.
― Includes intangibles and transfer of rights.

Where will VAT apply?
There is a distinction between the two principles of sourcing:
― Origin: where production occurs.
― Destination: where consumption occurs.
For goods:
― Goods are generally taxable where consumption occurs.
― Importation of goods is usually taxed at the port of entry.
For services:
― Due to the intangible nature of service, proxies must be used (e.g. where the
customer is established, where immovable property is located, where work is
performed).

VAT Registration in UAE Requirements

There are a couple of documents required that come with registering with the VAT in UAE. The nature of the organization matters in registration.

For a businessman applying for a VAT certificate as an individual, the following are needed:

  • Applicant’s request letter with signature
  • Applicant’s resident permit
  • Applicant’s passport copy

For businessmen registering as an authority, the requirements are as follows:

  • Decree copy
  • Application letter with authorized signatory
  • Act of incorporation copy

The requirements for a Dubai-based business registering for VAT are as follows:

  • Applicant’s application letter signed by the company’s authorities
  • Trading license copy

VAT Registration in UAE

The following business are the ones who should and can apply for VAT in UAE registration on or before 4 December 2017, as per the Federal Tax Authority (FTA):

  • Annual turnover is more than AED 375,000 (a must registration)
  • Annual turnover is between AED 187,500 and AED 375,000 (optional registration)
  • Annual turnover is less than AED 187,500 (registration not required)

The deadlines for registration are as follows:

  • The deadline for businesses with annual turnover of AED 150 million is on Oct 31, 2017.
  • The deadline for businesses with annual turnover of AED 10 million is on Nov 30, 2017.
  • The deadline for businesses with annual turnover of AED 375,000 is on Dec 04, 2017.

There are a couple of listed violations and respective penalties that were released in the provisions of Cabinet Decision No. 40 on Administrative Penalties for Violations of Tax Laws in the UAE that is adopted by the UAE Council of Ministers. Every single violation against the Federal Law No. 7 of 2017 on Tax Procedures, Federal Decree-Law No. 7 of 2017 on Excise Tax, and Federal Decree-Law No. 8 of 2017 on Value-Added Tax (VAT) shall be fined in accordance with the provisions in the Cabinet Decision No. 40.

In order to avoid being penalized, it is better to follow the laws laid down by the FTA and the government.

The VAT registration in UAE can fall into two categories as below:

A) Mandatory Registration

Any business is required to register if they fall into the following classifications:

  • For over the 12-month period, the taxable supplies of the business go beyond the mandatory registration threshold, or
  • The business expects to make taxable supplies in the next 30 days that will have a value that is more than the mandatory registration threshold, or
  • The amount of mandatory registration threshold is AED 375,000.

B) Voluntary Registration

Any business that doesn’t meet the mandatory registration criteria and falls into the following classifications may opt for a voluntary registration:

  • In the previous 12-month period, their taxable supplies or taxable expenditures are worth more than the voluntary registration threshold, or
  • The business expects for their taxable supplies or taxable expenditure for the next 30 days to be worth more than the voluntary registration threshold, or
  • The amount for the voluntary registration threshold is AED 187,500.

VAT Registration in KSA Requirements

Following a public consultation in July and August, the Kingdom of Saudi Arabia (KSA) released final VAT regulations through the tax authority (GAZT) website on 29 August. This follows an earlier consultation process and the publishing of a domestic VAT law in July. The regulations, the law and the finalized GCC Framework Agreement form the entire foundations for the introduction of VAT across all sectors in KSA from 1 January 2018.

According to Article 53, the VAT will become effective in the Kingdom from the beginning of the next fiscal year (1 January 2018)

Which sectors are subject to VAT?
The GCC’s Framework Agreement set some mandatory areas for zero-rating in all six Member States (such as exports of goods and services outside the GCC,medicines and investment metals). Individual countries are how ever able to elect whether exemptions or zero-rates apply in some other sectors. The regulations reflect that Saudi Arabia has chosen a broad tax base : with VAT applying to almost all supplies of goods or services, subject to limited exceptions. 

  • According to Article 2 and in alignment with the GCC VAT Framework Agreement, all imports into and supplies of goods and services in the KSA will be subject to VAT
  • According to Article 41, businesses who fail to apply for the registration within the specified period will be fined SAR 10,000.
  • The standard VAT rate is 5%. However, in accordance with the GCC VAT treaty and Article 10 of the KSA VAT law, certain goods and services will be subject to zero rate or will be exempted from the VAT. This will be determined in the KSA Draft VAT Implementing Regulations. 
  • According to Article 53, All Persons liable to register for VAT purposes, shall register with the General Authority for Zakat and Tax (GAZT) within 30 days from the date of issuing the law (i.e 30 days from July 28, 2017).

VAT Registration in KSA

Relief for small to medium sized enterprises GAZT has acknowledged during public information sessions that the obligations of the new VAT system will be felt particularly by smaller businesses. Indeed, the draft regulations allow for the administrative burden to be eased from SMEs:
– Whilst the standard VAT registration threshold is SAR 375,000, businesses with annual turnover less than SAR 1,000,000 are initially exempt from the mandatory registration requirement until January 2019, giving the smallest businesses more time to become ready for new rules;
– VAT reporting can be carried out on a ‘cash accounting’ basis for small businesses with turnover of less than SAR 5,000,000 – removing the administrative obligation of invoice accounting, and the additional VAT burden arising from unpaid customer debts for these businesses;
– All businesses with annual turnover less than SAR 40,000,000 may use a quarterly filing period, significantly reducing the number of VAT returns required per year and extending the time for making payment of VAT.

  • According to Article 21, if an invoice is issued or a payment is made before the implementation or registration date but the actual supply of the goods and services is on or after the implementation or registration date, the VAT will be considered to be due.
  • More detail on these and other provisions will be contained in the Implementing Regulations. GAZT is currently consulting with businesses on the content of these Regulations. Once finalized they will be published in the same manner as the KSA VAT Law.

Taxpayers have now been provided with the full complement of rules to understand their obligations and the impact of VAT for their businesses. Some large businesses have already been registered by GAZT as part of an early process, and the registration portal is now open for other persons liable to register.

The regulations are an extensive document, and businesses should ensure they understand the full implications on their operations. This document summarizes some of the key implications for businesses to be aware of and includes the following:

Core obligations
As an immediate step, all Saudi resident businesses will be required to assess their VAT-relevant turnover and, if required, to register for VAT with GAZT by 20 December 2017 at the latest. The main VAT obligations will take effect from 1 January 2018: VAT must be charged on supplies made after this date, and tax invoices must be issued for all taxable supplies, showing a range of mandatory information. Each business will need to calculate the net VAT due over monthly or quarterly tax periods, with electronic submission of the VAT return and the payment due for that period required by the end of the following month.

VAT Registration in Qatar Requirements

During 2018, it is anticipated that Qatar, along with the other Gulf Cooperation Council (GCC) member states will introduce a broad Value Added Tax (VAT) at a rate of 5%. The United Arab Emirates (UAE) and
the Kingdom of Saudi Arabia (KSA) were the first to implement VAT, as of 1 January 2018. According to the GCC VAT Framework Agreement, which was signed by all member states, the latest date for implementing VAT is 1 January 2019.

Who will be affected by the new tax?

VAT will impact most sales of goods and services in Qatar, with limited exemptions (e.g. financial services, insurance) and consumption tax relief. VAT-registered businesses will be able to claim credit for VAT paid on their expenditure, relating to their taxable business activities.

How can GM help?

GM professionals can help businesses prepare for the implementation of VAT in Qatar from a consulting, compliance and technology standpoint.

We also offer you practical solutions to address your tax needs and in depth knowledge of Qatar tax requirements. 

 With our tax professionals, we are in unique position to deal with the complexities and peculiarities of the Qatari tax system and also help you to meet the challenges of an increasingly sophisticated market.

Who will be affected by the new tax?
VAT will impact most sales of goods and services in Qatar, with limited consumption tax relief and
exemptions (e.g. for financial services, insurance). VAT-registered businesses will be able to claim
credit for VAT paid on their expenditure, relating to their taxable business activities

Who is involved?

― A taxable person: Someone who is liable for charging, collecting and paying VAT to the tax authority.
― A taxpayer: Someone on whom the final tax burden falls (i.e. the final consumer).

When will VAT be collected?
The timing of VAT collection will vary depending on the type of transaction
― E.g. importation in principle together with customs.
   Other elements may influence timing
― payment methods, e.g. prepayment
― invoice date.

What is the tax base?
The taxable amount includes everything constituting consideration obtained,
or to be obtained:
― Can be any non-monetary consideration
― Determination of what is included and not:
― taxes
― incidental expenses, such transport and insurance costs
― price discounts and rebates.
For importation of goods, customs value is used as basis, including customs duty.

VAT readiness
In 2018, it is expected that the Ministry of Finance in Qatar will announce draft VAT legislation, practical guidance and executive regulations regarding the new VAT law.
Experience has shown that businesses need significant lead time to prepare their organizations, customers, vendors and ERP systems for the introduction of VAT.

 

What does VAT
apply to?
VAT generally applies to all economic activities, divided in two categories:
The supply of goods:
― The transfer of the right to dispose of tangible property as the owner.
― The sale of tangible property.
― Occasional deeming rules – electricity, certain leases. The supply of services:
― Any transaction which does not constitute a supply of goods.
― Everything that does not qualify as ‘goods’.
― Includes intangibles and transfer of rights.

Where will VAT apply?
There is a distinction between the two principles of sourcing:
― Origin: where production occurs.
― Destination: where consumption occurs.
For goods:
― Goods are generally taxable where consumption occurs.
― Importation of goods is usually taxed at the port of entry.
For services:
― Due to the intangible nature of service, proxies must be used (e.g. where the
customer is established, where immovable property is located, where work is
performed).

Frequently Asked Questions About VAT

What is VAT?

Value added tax (VAT) is a type of tax that is applied to the goods or services produced. It is also known as a multi-stage tax. The UAE government has decided to implement this tax to have an additional source of revenue to provide a better service to the citizens of UAE.

Who should register for VAT?

As per the criteria released by the Federal Tax Authority, all businesses with taxable supplies worth more than AED 375,000 need to register for VAT.

Which businesses can voluntarily register for VAT?
All businesses with taxable supplies worth more than AED 187,500 and less than the mandatory registration threshold of AED 375,000 may opt for voluntary registration for VAT. This option is developed to give the opportunity for startup businesses to register for VAT whilst they still haven’t generated any revenue.
When is the VAT registration and VAT implementation date?
Starting on 1 January 2018, VAT will be implemented in the UAE. All businesses that are operating in the UAE are expected to be registered by then or penalties will be faced.
What will be the VAT rates?

The standard VAT rate of 5% is agreed to be charged on certain goods and services in the UAE. Non-taxable goods and services will not be charged, such as health, education, and local transport, etc.

Does VAT Registration make non-residents reliable?

Non-residents or tourists will pay VAT at the point of sale. 5% VAT will be applied to perfumes, makeup, luxury bags, and big-ticket items additional of the sale price. There can be an exemption wherein there is a requirement for a certain business to use a reverse charge mechanism for the purchases from any non-resident when accounting for VAT.

What if I did not register my business for VAT?

With the Cabinet Decision No. 40’s release, the violations for non-compliance and respective penalties are all listed in its provisions. Consumers may also lose confidence in the business that does not comply with the laws of the land, hence the impending sinking of the business.

In the case that my business falls in all the exempted categories, what is the impact of it?

All businesses that have exempted supplies as goods shall not charge from their customers. VAT cannot be claimed as well on purchases made.

However, all businesses that have partially exempted supplies as goods shall register for VAT. The VAT incurred can be claimed as well on taxable supplies

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