Are you ready for Expo 2020 in Dubai? The third quarter of the year 2008 was a very unfortunate one for the majority of countries. This year brought about an unexpected downfall because of the recession. Dubai was one of the most affected nations that had to suffer the repercussions of a great recession. Dubai’s economic activity substantially changed. Most of the businesses experienced a major setback, and it was like everything came to a standstill. The vast majority of the economic life of Dubai citizens depends on three to four sectors. These sectors include tourism, finance, real estate, and finance.
One of the most affected sectors is real estate. Almost 20 percent of the decline was witnessed in the tourism sector. The finance sector got crushed by the piling up of debts. Construction workers and contractors had to put a stop to the work and many of the foreigners based in Dubai were forced to flee from there.
Second-quarter of the year 2013 was akin to a new ray of hope. Dubai followed the journey of slow growth and recovered almost a substantial part of what it had lost in the unfortunate year of 2008. At the turn of events, Dubai is now ready to host Expo 2020. It is one of the biggest global events.
All those countries and intergovernmental organizations that have been extended an invitation will be participating in the Dubai EXPO 2020. They will be participating as an exhibitor. Until now, almost 190 countries have shown their willingness to be a part of this global event by accepting the invitation.
Every individual who is willing to participate in this global event needs to register for VAT. But there is a condition for this. They need to register for VAT only if the total value of their supplies or imports in Dubai is around AED 375,000 or more. All the participants who have registered for VAT must issue a tax invoice in a proper form. They are expected to submit the VAT Return Filing to the Federal Tax Authority. This needs to be done periodically. They are expected to abide by all the provisions listed in UAE VAT.
Most of you would be wondering about the products and services that are covered under the VAT. Most business services and products are charged at 5%. This is the standard rate of VAT. Nevertheless, some goods and services that are of the utmost importance for the economy are not covered by VAT. Only two things happen in cases of such products and services. They are either subject to complete exemption or they are charged at a 0% rate. There’s a significant difference between the two though they appear to be completely similar on the surface. Suppliers of goods and services who are subject to 0% rate may reclaim VAT that they paid. On the other hand, suppliers of goods and services who are subject to an exemption are not required to register for VAT in any circumstances. However, if they do register for VAT, they won’t become entitled to claim any VAT, unlike the other set of suppliers.
Let’s learn more about which products are covered in both categories:
This category is inclusive of exports of goods and services. It is done to safeguard those areas of business that are crucial for the UAE. Other areas included in this category are medical equipment, the supply of buses, trains, commercial aircraft, and healthcare. Newly constructed household properties, natural gas, crude oil, etc. are some of the other areas covered under this category.
This category includes local public transport services, residential buildings, and bare land. Exempt rate is also inclusive of certain financial services. On the one hand, this category includes fixed deposits and loans but excludes fee-based financial services.
Several advantages are to be gained from VAT. It will be benefiting both startups and UAE simultaneously. Some of the advantages are listed as follows:-
Boost to government coffers
The government of any country looks for ways to increase the revenue stream of the respective country. UAE government will be benefitted from the new revenue stream that will be boosting its coffers. This revenue will help in stabilizing the economy and getting rid of the after-effects of the 2008 recession. Local businesses will have a lot to gain from a stable economy. It will allow them to turn around their business and involve themselves in profit-making.
A country’s infrastructure is crucial to attracting foreign investment. When a government spends money on developing the country’s infrastructure, they make it economically feasible for foreign investors to start a business in their country. This is because improving a country’s infrastructure has multiple effects. It leads to the holistic development of the country. Improved infrastructure is a reflection of decreased expenditure on business for foreign investors. Hence, the UAE government will be promoting the country’s infrastructure, ultimately benefiting other areas such as the country’s economy.
Implementation of well thought and drafted tax regulations can result in non-financial benefits to a country’s economy. UAE Government’s idea of introducing VAT will go a long way in ensuring accountability on the part of the government. Properly maintained taxation records would help in creating a system where officials will get a chance to make informed decisions. This, in turn, will lead to a significant reduction in cases of corruption, fraud, etc.
Increased business efficiency
When companies are replacing obsolete accounting systems, they may find it expensive. But in the longer run, it’s going to prove much more profitable. Initially, the costs may seem significantly higher due to the implementation of the roll-out. Still, in the larger scheme of things, businesses will realize that the new system makes their work environment more profitable and efficient.
There are some more advantages to be gained from VAT, but it won’t appear so on the surface. It requires time and patience. Most of the businessmen, especially startup owners, are curious about the profits and losses they will incur due to this new system. You may find the entire idea of VAT completely burdensome and overwhelming in the first instance. Hence, it would be better if you hire the services of a VAT consultant in Dubai.
If you are looking for a VAT consultant in Dubai, reach out to CDA Accounting and Bookkeeping Services. They have the requisite experience in this field. They understand the impact of VAT on the start-ups in Dubai. They will help in ensuring whether you are maintaining the correct records and taking the crucial measures for submitting the current year’s VAT returns. They will create a framework for you that will help in assessing whether you are discharging your tax obligations as a business owner or not. The transitioning from the old and inefficient system to the new VAT system may seem complicated at the onset. Still, a VAT consultant in Dubai will ensure that your business runs just as smoothly irrespective of the change in taxation policy.