Answering this question is similar to answering why you need a visa to enter a country. In the UAE, VAT plays a major role. If we go back to its introduction, VAT in UAE was set in 2018. Initially, VAT in UAE was set at 5%. Before diving into VAT services, let’s recap the concept of VAT.
Ideally, value-added tax (VAT) is a casual indirect tax levied by certain countries. Technically, it is a consumption tax. This value-added tax is levied indirectly on the end users/ customers for the consumption of items, goods, and services.
Simply put, VAT is looked at as a target control. Gradually, the percentage of VAT keeps increasing as per the stage of goods/production. Back in 2018, UAE introduced VAT in accordance with the agreement between the GCC (Gulf Cooperation Council) states.
If we look at it from a different angle, VAT is a sort of accounting service. It is an amount that is collected from consumers partly/ in stages. Following this introduction, let’s now delve into why you need VAT services in the UAE.
The Importance of VAT (Value Added Tax) in the UAE
As discussed above, Value added tax is collected and submitted in stages. Herein, customers pay a certain tax at every stage. As a result, each stage of the business comes under the purview. Eventually, it eliminates the black market operation along with uncertified and unregulated business opportunities.
In addition, VAT is generally neutral. In the UAE, most businesses can collect VAT. The good part is that the system of VAT gives rise to a tax-compliant business market. For a successful operation of the market, it is better if businesses follow the regulations set by the government.
Where Is The VAT Implemented?
Ideally, the UAE government incorporates the VAT system into all of its business regulations. The aim here is to bring an efficient solution to lower the dependency of hydrocarbon and oil in the region.
If we speak about the revenue collected by VAT, the amount is huge. Through this VAT implementation, the UAE government generally receives tons of revenue. However, the entire increase in revenue picture is utilised in a brilliant way. It is used to make the public facilities robust and stronger.
All the public facilities that are used by each citizen needs consistent maintenance. By collecting these revenue, the government maintains its services thoroughly. Not to forget, the VAT creates a positive impact on the GDP of the country as well. In fact, it even shows the responsibility and discipline of the citizens of the country.
Herein, the benefit of the VAT system is that because each small business becomes responsible, it just follows all the rules set by the government. In case a business denies following the rules and regulations set by the government, the business might need to face severe consequences in the future.
What Is The Final Word?
It is important to note that not all businesses are eligible or levied VAT. In the UAE, there are certain zero-rate businesses that are held exclusive of paying the value-added tax. Speaking of calculating, VAT is quite difficult to calculate as it has a complex nature.
Under such circumstances, you may opt for expert VAT services to get detailed information about VAT. However, as a whole, value added tax is a driving factor for enhanced and dynamic economies in the UAE which is crucial for the sound development of the emirates.
All in all, paying Value added tax is important as customers use the services provided under the government budgets. Implementing VAT in the country helps the government to gain a new source of income.
This helps the government to go ahead with the provision of top-notch public services in the long run. To sum up, accounting services help the government to take a step towards lowering the dependency of income gained from hydrocarbons and oil.
That said, if you are new to the UAE and are looking for an ideal platform to discuss UAE VAT, reach out to the experts at SA Consultants UAE. They are a one-stop platform that offers standard solutions and accounting services for all businesses in the UAE.