Taxpayers in Dubai and the UAE have to be prepared for the implementation of the 5 percent VAT which has been implemented recently. This came after having gone through several hurdles and teething concerns. Taxpayers are expected to be ready for audits to be done by UAE Federal Tax Authority and Saudi Arabia’s General Authority of Zakat and Tax. This will test their resources and how accurate their record keeping is. This will also test their filing of tax returns. It is necessary for the businesses in Dubai and the UAE to be able to totally justify all their numbers, data, statements, payments, invoices, and other aspects of the VAT compliance that may be considered by the implementing agencies. For an overview of the taxes to be filed in Dubai and the UAE, read this.
GCC countries have started to introduce taxes as reaction to the impact of the crash in Brent oil prices. The International Monetary Fund estimated that the introduction of VAT in the region will be able to generate a revenue of 1.5 to 3 percent of non-oil GDP. Several companies struggled last year to comply with VAT. There were some that waited too long. Others did not expect the levies to be introduced. There were those who had to change their processes for them to be compliant.
Implementing the VAT entails a steep learning curve for it to be done the right way. This is because is an unfamiliar entity in the GCC. Tax authorities in the two states gave the taxpayers leeway to get past the initial hiccups. An example of this was the extension period for the late registration penalties until the end of April.
Several challenges are faced by the tax authorities in implementing the VAT. They need to continue explaining and clarifying the rules and regulations as more issues arise. Authorities are challenged to speed up the clarifications, the process in rulings and guidance for the taxpayers to fully understand why they need to pay VAT.
Businesses on the other hand face the issue of digitizing their processes. This comes in the mid of expectations of both the UAE and Saudi Arabia to require the tax processes to be digital. All the tax returns are filed online. For expats, here’ is a helpful guide for them to file taxes in Dubai. Experts however expect the UAE and Saudi Arabia to have a global approach in VAT implementation. The journey in VAT implementation has just started and it is just the beginning of the transformation of VAT in the GCC economy.
If you want to learn more about taxes in Dubai, read here: Overview of Dubai and UAE Taxes.
