Apprehensions edge away as VAT becomes the new normal norm

Value-Added Tax (VAT) has been the subject of discussions, debates, reviews, and opinions in 2017. The anxiety and fear that surrounded this term were not just extraneous but placed unnecessarily. But with the onset of 2018, life moved on!

The UAE introduced a 5 percent VAT starting January 2018 with a standard return filing period of 3 months, applicable to most businesses, while few businesses will be asked to file every month.

The first week of VAT saw a slump for several businesses, but the following weeks saw the businesses return to normal. The introduction of VAT certainly created a stir in the country. Still, in its first month of implementation, businesses have realized that VAT is a clear and transparent policy posed to the final customer. It does take a bit of additional record keeping, but the final results are stupendous!
An estimated 350,000 companies are subject to VAT in the UAE, and penalties for filing incorrect returns, start at Dh3,000 and a Dh10,000 fine for a first-time failure to keep the required tax-related records.

Despite the concerns and seemingly endless number of questions surrounding it, VAT was introduced by the Federal Tax Authority (FTA) in a relatively smooth rollout last month. While businesses had mixed views and opinions about VAT, the new era’s shift has been positive.

Businesses have not only changed their core operations but are now better at managing their financial records, technology, and human resource mix. The day-to-day activities have become more organized, and many have found stable jobs with the introduction of new divisions and departments.

Studies indicate that VAT will help support the UAE’s long-term sustainable development process, increase individual prosperity and promote community stability. It has been noted that businesses, whether it be jewelry or a grocery shop, have witnessed a steady stream of income even after the imposition of VAT.

The businesses were not only least affected by the imposition of value-added tax (VAT) because it is one of the lowest rates in the world, but also because the government will be pumping back tax funds into the development projects, which, in turn, will boost several industries in the country.

Since the UAE’s establishment, the government has provided unlimited support to all business sectors, thus offering significant opportunities to foundations and companies to grow and expand both inside and outside the UAE. The introduction of VAT certainly has no negative effects.

What was anticipated to be a challenge for the country’s growth has turned out to be positive? UAE businesses have realized that VAT has not only brought transparency to company accounts and financial dealings but has also helped them make smart adjustments to their monthly budgets to absorb the new tax.