Register or not to register
Mandatory registration has been stated as SAR 375,000 (USD 100,000) in total annual value of supplies and voluntary registration is 50% of this amount. Is your business required to register? Are you below the mandatory registration limit but above the voluntary limit? What is best for your business will depend on the nature of the services being provided and the related expenses. For those that fall below the voluntary threshold, and those that qualify but do not apply for voluntary registration, VAT will be an additional business expense if applicable.
Free zone companies
This still remains a grey area. There is no clarification as yet whether free zone companies will be required to register and pay VAT, or where there will be a full exemption. Consideration should also be made, and the impact assessed if trading with free zone companies.
Exemptions and zero rated supplies
The GCC framework agreement on VAT has included provisions for exempt and zero rated sectors and services. Each member state has the right to
exempt or zero rate (0%) the following sectors:
• Education
• Health
• Real Estate
• Local transport
There are also special exemptions for government and charitable organisations, and an option to subject the oil, petrol derivatives and gas sectors to zero percent (0%).
Intra GCC transportation will be subject to zero percent (0%).
There are many other exempt and zero rated sectors and supplies. Please get in touch with us to understand whether your business will fall within any of these classifications.
Planning and advice
Preparation is the key. You are entitled to structure your business to pay the minimum legal amount of tax. With the deadline of 1 January 2018 for implementation fast approaching and registrations likely to open from September 2017, it is important to assess the impact of VAT on your business, structure appropriately, and develop a process to meet compliance. HCA Tax Partners has been advising businesses across the globe and has VAT specialists in the UAE to help you assess business impact and get ready for the new regime. Please feel free to get in touch with one of our UAE tax advisors at
[email protected].