Shuraa Tax Blog

Category: UAE Taxation

  • Impact of UAE VAT on Business-to-Business supplies of Healthcare Services

    Impact of UAE VAT on Business-to-Business supplies of Healthcare Services

    The Federal Tax Authority (FTA) in UAE recently issued a public clarification on business-to-business supplies of healthcare facilities & services. According to it, healthcare services that are necessary to be supplied to patients in need will be subjected to zero-rated VAT in UAE. Below conditions must be fulfilled in order to treat supply of healthcare services at zero rate: –

    • Services must be made by a healthcare body or institution, doctor, nurse, technician, dentist, or pharmacy, licensed by the Ministry of Health or by any other competent authority.
    • Relate to the wellbeing of a human being.

    However, VAT @zero rate on healthcare services is applicable only if the provider is supplying its healthcare services directly to the patient. If in any case, the “recipient of supply” of healthcare services are different people other than end patient then the supply will no longer be qualified as zero-rated and a standard rate of VAT will be charged.

    Let’s understand a little better about VAT implications on healthcare services:

    As per the UAE VAT law, healthcare services are defined as any service supplied that is accepted in the medical profession for the treatment of the patients or “recipient of supply” of the treatment. It also includes preventive healthcare services. The recipient of the healthcare services must be the patient receiving the treatment and if that’s not the case then 5% VAT will be levied on the supply of these services. As a result of this, healthcare providers need to make sure who is on the receiving end of the treatment to determine if the supply shall be zero-rated, else a standard rate of VAT will be charged.

    Here are some of the examples of different health scenarios to help you better understand under what conditions will the supply of healthcare services be zero-rated. Each supplier of healthcare services should consider the VAT rules while supplying their healthcare services.

    1st situation: A doctor has contracted with the hospital to provide its healthcare services to the patient within the hospital premises. This will involve two kinds of supply/transaction situation-

     A) Supply by the doctor to the hospital: The doctor is seen supplying its services to the hospital and not directly to the patient. Even though it’s related to the health of patients, it won’t be treated as “healthcare services” taxable at zero rate. Now, as the doctor has contracted with the hospital to provide its services to the patients, the services will be subjected to 5% UAE VAT

     B) Supply by the hospital to the patients: The hospital is supplying its healthcare services directly to the “recipient of supply” of the services. Therefore, these are subjected to zero-rated VAT.

    1. A hospital suggests a laboratory to a patient for conducting its medical test. As a result, the patient enters into a separate and direct contract with the laboratory for the supply of medical tests. Because the laboratory is directly supplying its services to the “recipient of the supply” it will be subjected to zero-rated VAT as per the UAE VAT laws.
    2. A hospital needs to perform a specialized test/procedure on its patient and therefore enters into a contract with another hospital to perform the test/procedure. It will involve two different supply situations:

     A) Supply of services by hospital 2 (specialist hospital) to hospital 1: The hospital 2 is supplying its specialist healthcare services to hospital 1 and not the patient directly so the cannot be marked as “zero-rated”.

     B) Supply of services by hospital 1 to the patients: Hospital 1 is treating the patient directly so the supply of services from it to the patient will be constituted as a part of the definition of “healthcare services” as defined by UAE law of VAT and therefore will be treated as “zero-rated”.

    To get the best tax consultants in UAE contact Shuraa Tax Consultants and Accountants which is the leading tax agency of Dubai. Their team of dedicated experts promise to resolve all VAT related queries of various businesses. Speak to our tax agents and consultants and get professional guidance and support on managing taxation and VAT issues at affordable rates. Contact us today:

    Email: info@shuraatax.com

    Phone: +971 508912062

  • Top 10 Key Facts About VAT in UAE

    Top 10 Key Facts About VAT in UAE

    The taxation rules in the UAE underwent a modification in 2018. Over 170 nations impose VAT as a means to improve revenue with UAE also doing the same to boost overall revenue. Value Added Tax, also known as VAT, went into effect on January 1st, 2018, in UAE. According to UAE VAT Law, 5% of the price of delivered goods and services are subject to VAT. 

    In certain places, VAT is also called as a consumption tax or a goods and services tax (GST). The final consumer in the UAE is responsible for paying Value Added Tax (VAT) at every stage of the supply chain. Businesses, on the other hand, represent the government by acting as agents to collect and account for taxes.

    Read on the points or simply watch the video to understand the UAE VAT procedures –

    https://www.youtube.com/watch?v=tDTSIZrJXvk

    1.) What is VAT?

    A levy known as Value-Added Tax (or VAT) is imposed on the majority of products and services that are supplied. One of the most widespread consumption taxes in the world is this one. The Goods and Services Tax (or VAT) is present in more than 170 nations, including all 29 EU member states, Canada, New Zealand, Australia, Singapore, and Malaysia. At each point of the supply chain, VAT is calculated. Typically, businesses collect and account for the Tax, but the final consumer is responsible for paying the VAT. Businesses collect the taxes on behalf of the government.

    2.) When should businesses register for VAT in the UAE?

    VAT registration in the United Arab Emirates falls into two categories: mandatory VAT registration and voluntary VAT registration. 

    The two main methods for registering a VAT in the UAE are as follows: 

    Voluntarily registering for VAT: 

    If a business’s annual (or less for new companies) taxable turnover and imports reaches AED 187,500, it may choose to voluntarily register for VAT. 

    Mandatory VAT Registration:

    Businesses with annual (or less for new companies) taxable turnover and imports of more than AED 375,000 or expected taxable revenue is more than AED 375000 must mandatorily register for VAT. 

    Note: Companies in the UAE are not required to register for VAT if their annual taxable turnover and import is less than 187,500 and expected revenue is nil.

    3.) What are the UAE’s VAT exemptions?

    The UAE Executive VAT Regulations list the exempt supplies that are not taxable.

    According to UAE VAT Law, a person is not eligible for an input tax credit on purchases they make if they supply UAE VAT exempt goods and services. 

    Consider a manufacturer who purchases raw materials at a 5% tax rate and creates tax-free goods or exempt goods as an example. In such a situation, he will be responsible for paying the 5% input tax on the raw materials because he will be unable to claim the input tax credit. 

    In addition, the UAE exempts several financial services, residential property supplies, the supply of bare land, etc. from paying VAT.

    4.) Important records to retain

    In addition to accounting records (payments, receipts, purchases, sales, revenues, and expenses), all firms, registered and unregistered, must keep financial records such as balance sheets, profit and loss statements, records of fixed assets, payroll, inventory, and stock levels if any.

    Changes to a company’s basic practices, financial management processes, methods for maintaining accounting records and books, technology used in those practices, and human resources (accountants, tax advisors, etc.) may all be necessary.

    5.) Which products are subject to VAT in the United Arab Emirates?

    Most products and services in the UAE charge VAT @ 5%, which are not exempt or zero rated, or out of VAT scope. Items like office supplies, school uniforms, extracurricular activities, transportation services, automobiles, oil and gas, electronics, cellphones, second-hand goods, import goods, as well as insurance coverage for health, motor, property, reinsurance, water, electricity, etc, are liable to charge VAT.

    6.) What services in the UAE are subject to VAT? 

    In the UAE, certain services are in fact subject to VAT, including plastic, cosmetic, or elective surgery, education offered by private higher education institutions, fee-based financial services, automobile servicing, repairs, catering services, hotels, and restaurants, as well as telecom and electronic services.

    7.) UAE VAT liability payment by the deadline

    In the UAE, the 28th day of the next month serves as both the deadline for filing the VAT return and the deadline for paying the VAT liability.  Deadline will be shifted to the very next day if 28th is public holiday. You can pay VAT liability to FTA in a number of ways, including by bank transfer, or credit card. Processing times and fees vary depending on the mode. Charges for credit card payments are between 2 and 3 percent. The bank fees determine the cost of a bank transfer.

    8.) What is the process in the UAE for filing tax returns?

    A VAT-registered company submits a quarterly VAT Return. As a result, the authority may require specific enterprises to submit a return each month in order to verify compliance with the VAT Laws and lower the likelihood of tax evasion. 

    A registered business must fill out the VAT Return Format according to UAE VAT Executive Regulations. All VAT-registered firms in the UAE submit their returns by logging in to the FTA portal because the return filing process is entirely online.

    9.) How Does the VAT Audit/Tax Audit System Work in the United Arab Emirates?

    A field tax audit is when the FTA conducts a VAT audit or tax audit in the UAE at the company’s or person’s business location. 

    The taxable person typically provides all the data in the FTA Audit File (FAF), a format that has been prescribed. The UAE requires businesses that register for VAT to keep thorough financial records of all transactions in order to submit periodic VAT returns.

    FTA chooses which companies to audit for taxes at its discretion. A VAT audit also seeks to confirm the accuracy of a taxable person’s tax liability. 

    The FTA has the right to request original copies of any records during a tax audit, check the business’s assets and inventories, and even confiscate them if necessary. 

    Additionally, the taxpayer or his tax agent must support and assist the tax authority by offering all required documentation proof. 

    The FTA has the authority to issue a notice to the taxable person asking him to pay the VAT along with penalties if it discovers anomalies after reviewing his financial and tax records.

    10.) What are a Business’s Primary Responsibilities in the UAE?

    Any business primary responsibility includes the following: 

    • Maintain accounting records while making sure that the account information is correct.
    • Register for VAT within the deadline if the minimum or mandatory turnover requirements are met.
    • In case the turnover is below the minimum criteria, keep accurate financial records to demonstrate why it is not required to register for VAT. 
    • If it has a valid TRN, it can charge VAT on both taxable products and services. 
    • Declare an input tax credit for the VAT you paid when buying taxable suppliers. 
    • Timely submission of VAT returns. 
    • If the amount of VAT charged exceeds the amount of VAT paid, you must pay taxes to the government.
    • Comply with UAE VAT laws.

    Conclusion

    As we know, getting our taxes in order is not as easy as it seems. Our tax experts do, however, put our words into action. The characteristics listed above are parts of who we are, and we are proud of each one. Shuraa Tax are the top pick for businesses looking for the best tax consulting firm in the UAE because of this. 

    We provide you with the representation you require to win over investors and stakeholders. In addition to being your tax associate, Shuraa Tax is also your growth partner.

    We would be honored to be a part of your success story if you are looking for the best tax and accounting consulting in the UAE to handle the full procedure. Call us on or WhatsApp at +971508912062 or email us on info@shuraatax.com.

  • Why do you need accounting and bookkeeping services in Dubai?

    Why do you need accounting and bookkeeping services in Dubai?

    Accounting and bookkeeping services in Dubai are the need of the hour! The implementation of VAT in the UAE has not only affected the tax calculation but also changed the way UAE companies operate and do business. Be it accounting services for small business in Dubai, or bookkeeping services for a multinational company – outsourced accounting services UAE can provide the best for you company!

    But if you are still thinking whether you need to outsource accounting and bookkeeping services in Dubai, here are some reasons that will help you decide.

    File UAE VAT returns

    Companies registered by the FTA for VAT in Dubai or anywhere across UAE need to file tax / VAT returns every interval. These intervals may be maintained on monthly or quarterly basis depending on the nature of the business.

    Follow FTA compliances

    Taxable entities must adhere the FTA compliances while doing business in the UAE. Businesses that appoint UAE bookkeeping and accounting firms or even tax consultants are for sure updated to incorporate the new VAT laws. Bookkeeping and accounting firms ensure that FTA compliances are updated in your operations, sales, accounting methods, business procedures and expense management systems.

    Reduced Costs & Limit Errors

    Accounting and bookkeeping services in Dubai – UAE can seem like an additional cost. However, outsourcing accounting services can help you reduce costs & limit errors. Accounting in UAE is a tedious task! If you do a mistake you will have to face the penalty, but a professional accountant will know how to lessen costs without any blunders. Professional accountants can limit human error, have complete knowledge about payments and tax obligation, due dates, etc.

    Focus on your core business

    Taxation in the UAE requires fulltime attention and monitoring. Outsourcing accounting and bookkeeping services in Dubai – UAE will enable you to focus on your core business. While you strategize, market, fund, sale and focus on your daily operational, an accounting and bookkeeping firm can handle the taxation aspects of your business.

    Thus, to ensure that your company has implied the FTA compliances in all realms and properly maintained the accounts contact Shuraa Tax Consultants.

    Shuraa Tax Consultants are the best in accounting and bookkeeping services in Dubai and across UAE. We are a Dubai accounting company offering bookkeeping services in UAE to help you manage your finances, assist you with VAT registration, raise VAT compliant invoices, create business reports, generate VAT returns and other bookkeeping services.

    For further details of accounting and bookkeeping services in Dubai book a free consultation with our expert tax consultants in Dubai or simply call on +971508912062. You can also email us your query at info@shuraatax.com and we will call you back to solve all your doubts.

  • 10 things you need to know about the new UAE tax law 2018

    10 things you need to know about the new UAE tax law 2018

    The legal framework in the United Arab Emirates has been imminent and divergent, to bring about progressive changes and development in the country. Aiming similar outcomes for the region, the new UAE tax law was introduced recently on 1st January 2018.

    According to the new tax law in Dubai – UAE, Value Added Tax (VAT in UAE) is applicable to various categories of businesses and services. All the commercial activities are now subjected to the payment of five percent (5% VAT) value-added tax VAT in Dubai, UAE.

    NEW TAX LAW IN BRIEF

    The Federal Decree Law No. (8) Of 2017 Value Added Tax stated by the Ministry of Finance (MoF) summaries the tax possibilities within the country; the VAT rate, the responsibilities that will be carried out by the collection of these taxes for the growth of the country; the taxes that will be applied to the supply chain. The new UAE tax law also defines the UAE tax registration and deregistration, as well as the mandatory threshold for tax registration, tax group, registration exceptions, tax registration for government bodies as well as voluntary registration. The Article 85 of the UAE VAT Law, showcases the effective date of this Decree – as 1 January 2018.

    This new UAE tax law environment in the country has also brought about a series of confusion and uncertainties. Moreover, businesses and commercial entities are also having a hard time understanding the new tax law in Dubai and all other parts of the UAE.As consumers, traders and end-users across the UAE need to familiarize themselves with a value-added tax (VAT) system and to be able to identify their role as taxpayers, we at Shuraa Tax Consultants offer you suitable help in this regard.

    NEVERTHELESS, HERE ARE THE 10 THINGS THAT YOU MUST KNOW ABOUT THE NEW UAE VAT TAX LAW:

    1. The VAT law in UAE is based on the VAT guidelines agreed in the Unified GCC Agreement for Value Added Tax (VAT) published in the Official Gazette on 21 April 2017. However, specifications on the implementation of VAT in UAE incorporated in Federal Tax Authority FTA regulations.
    2. Businesses operating across UAE need to adhere to the changes in the cost structure, compliances as well as organizational structure as well as file tax returns on Monthly and Quarterly basis due to the VAT implementation in UAE and comply with the UAE VAT requirements and updates at all times.
    3. The mandatory threshold to register for VAT in UAE is Dh375,000 and the voluntary threshold to register for VAT is Dh187,500. Business in the process of establishment/company formation in UAE needs to get their VAT registration under the new UAE VAT law within 30 days of establishing the company/business, while older companies had to register before 31 December 2017 to avoid penalties.
    4. Companies in UAE must obtain Tax Registration Number from the Federal Tax Authority to pay VAT. The Tax Registration Number also called for TRN number or tax identification number which is required to print all the invoices and bills of the company. The UAE TRN Number is also used while filing tax returns and dealing with the FTA.
    5. Companies and business entities in the UAE must follow a four-processes 1) Obtain VAT registration from the FTA 2) Charge VAT in UAE on taxable goods or services; 3) Reclaim any UAE VAT they have paid on business-related goods or services; 4) keep a range of commercial and business records for FTA’s evaluation.
    6. As of now, FTA has stated that exemption on VAT is on basic education, healthcare, residential real estate, local transport and zero-rate on some sector. The VAT exemption or zero-rating in these commercial sectors are currently a huge saver for VAT payers in UAE. However, except VAT exemption or zero-rated supplies all other goods and services in the UAE, even if supplied by the governmental bodies and governing authorities are chargeable to VAT.
    7. VAT penalties are outlined by the Federal Tax Authority and can be applied to 1) companies and businesses failing to register for VAT in UAE; 2) companies and businesses, who do not submit a tax return or make a payment within the determined period; 3) companies and businesses, who do not maintain  the records as per the VAT guidelines of the tax legislation; 4) any kind of tax evasions, deliberate act or omission was done intentionally to violate the provisions the FTA will impose VAT penalties.
    8. As per the new UAE Tax Law, the credit of input VAT is not allowable on the expenses incurred for producing exempted supplies. Moreover, input tax cannot be claimed if it is incurred in respect of specific expenses such as obtaining a vehicle for rent or lease for personal use, entertainment expenses, etc. For e.g. employee entertainment as per Article (53) of federal Decree-Law No (8) of 2017 on Value Added Tax.
    9. In case of a UAE nonresident, the new UAE Tax law who makes supplies of goods and services in the country requires registration in accordance with the provisions of the Decree-Law. The Federal Tax Authority shall register him with effect from the date on which he or she started making supplies in the UAE. It could be an earlier date if agreed by the FTA and the non-resident entity.
    10. All the UAE companies and businesses within the country – whether registered for VAT or not, must retain their financial records. These financial records include Balance Sheet, Profit and Loss reports, fixed assets reports, payroll sheet, reports on inventory, stock level reports and accounting records (including payments, receipts, purchases, sales, revenues and expenses).

    Concludingly, it is also important to know that almost all commercial individuals or companies require to change their financial management practices as well as core operations to follow the procedures levied by the legislation in terms of accounting books and records. Also, the technology of accounting practices and human resources such as chartered accountants, tax advisers and UAE tax consultants are a must!

    The most easy and quick solution to maintain all sorts of communication and understand guidelines provided by the Federal Tax Authority is to get in touch with SHURAA TAX CONSULTANTS.

    SHURAA TAX CONSULTANTS support you with each and every requirement for UAE VAT & Dubai Taxation Services. Speak to our Tax consultants to understand the taxation system in UAE. Call us on +971508912062 or visit www.shuraatax.com.