VAT means Value added tax which is imposed by the government of any country on the goods or services manufactured or produced and then that VAT(tax) is transferred to the general public who buys the product or service at the end after the manufacture or production by a company or business.

                         

In many countries the VAT is also known as goods and services tax like in India VAT is known as GST(goods and service tax).

 

The tax is levied on the price of a product or service at each stage of the production or manufacture or distribution or the sale to the end customer. The ultimate customer is a business that collects and then pays the government. VAT on its products or services produced by them and then they can reclaim the tax paid.

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The VAT tax is somewhere similar to Sales tax but with many other differences and specialities. For every service provider or business it is compulsory to do VAT registration and the VAT registration can be done online or offline both. If you want to do VAT registration online you can also do it from home or any cyber cafe.

 

Gulf Cooperation Council VAT system

Rapidly increasing growth and pressure on the GGC governments to provide infrastructure to the urban areas and support them the Member states of the Gulf cooperation council(GCC) with together make up the Gulf cooperation council have felt that they need to introduce a tax system in the whole region.

 

In particular the United Arab Emirates(UAE) was the first country in the region who implemented the VAT tax from 1st January 2018 after that other GCC member countries followed the same route of taxation. After that VAT registration UAE or in particular anywhere in the UAE whether you are in Dubai or any other city of UAE its compulsory to do VAT registration Dubai or UAE.

 

For the companies who have annual revenue more than $102,000(DHS 375,000) VAT registration UAE is mandatory.

 

Oman minister of Financial Affairs indicated that GCC countries have agreed the introductory rate of vat which is 5%.

 

The Kingdom of Saudi Arabia introduced the VAT system on 1st jan 2018 also at the rate of 5% however they increased the VAT value from 5% to 15% in the country as of July 2020(due to the effects of the Covid 19 pandemic and the crash in the Oil prices in the Gulf region) which is much higher than UAE. So it is beneficial to start business in UAE than Saudi to save much money from value added tax. Only you have to fill VAT registration form UAE and you can do it online or offline both.

 

 

Criticism of the VAT over the world

 

Fraud risk of criticism

VAT overclaiming is a risk for the state due to carousel fraud.

 

Cash Flow impacts

Multiple VAT charges over the supply chain which gives you rise to cashflow problems due to refund delays from the tax administration authority.

 

Compliance

In many European countries the customer, seller and also the marketplace are responsible for the VAT no. verification for the parties involved in the transactions.

 

 

You can do online registration for VAT easily with The VAT consultant.