VAT's Impact, One Month after Its Implementation
VAT in UAE was introduced on January 1 @ 5% and it has been a month since its implementation. 260,000 companies out of an estimated 350,000 have registered but still there are a number of areas where the businesses are struggling to make sure that they are applying the correct treatment.
Hollywood and Bollywood Actors to Register with FTA
The bollywood and hollywood stars who intend to continue performing in UAE are required to register with the FTA to obtain the Tax Registration Number in order to pay VAT in case the invitee is not registered with the FTA. The celebrities are now required to register in his or her name as an individual with the tax authority by submitting the details that are required online on the FTA Portal. In case the performance of such services exceed the threshold limit of Dh 375000 in 12 months and the payment is received from an unregistered persons , then the celebrities would have to register for a TRN with the FTA and pay VAT , whereas they can also appoint a legal representative to register on their behalf.
However after VAT implementation, the country’s shipping , customs clearance and the logistic sectors have thus showed a high level of responsiveness and cooperation in the implementation of VAT. The goods that have been transported between the designated zones are exempted from VAT as long as they are complying with customs law and also no part of a shipment was released, used or altered during the transfer.
Boom in Jobs in the Top Accounting Firms of the Gulf
The size of the indirect tax teams in the country has been doubled in the Big Four multinational accounting firms in order to cater the sharp rise in demand arising from the implementation of VAT in West Asia, PwC India, EY, Deloitte and KPMG.
VAT’s Impact on the Insurers
The operating profits are being hurt of almost all the insurers after the introduction of VAT. This is because all the insurance policies except life insurance are subject to the levy. General insurance policies that have been sold last year but with a policy period that runs into 2018 are subject to 5 per cent VAT on the premium on this year's portion of the policy. However the main issue that remains unresolved is whether they are obliged to deposit the tax liability as to whether they can recover this amount from the customers or not. It is possible for the insurers to collect some portion of this amount from the corporate customers who can claim this VAT on their tax return as an input tax.
Impact on the Car Ownership
After the implementation of VAT, the decision of the residents who were struggling to figure out if they can afford to own a car has become more difficult. This is because VAT’s application depends on whether one is buying from the agency or dealer or directly from an individual owner. If one is purchasing a brand new car from an agency or a pre owned car registered under the agency or dealer, one would have to pay 5% VAT on the car’s value. No VAT applies to the car loan installments and the associated interest rates as of yet.
Minimal Impact on Real Estate
Introduction of VAT for property transaction in Dubai has been making a negligible difference in terms of buyer interest as 5% remains one of the lowest rates for VAT in the world and since it is usually charged by one side and claimed back by the other, there is not likely to be a much impact overall.
Business in UAE
VAT’s impact for The UAE businesses has been least affected by VAT’s impact as this is one of the lowest rates in the world and the government would also be pumping back tax funds into the development projects that in turn would boost a number of industries in the country.