Thursday, 22 March 2018

What Is Taxable Income in UAE and How do VAT Calculation?




These time The VAT Registration has been rampant for the past few months because of Federal Tax Authority (FTA) has to provide the facility that many businesses have been registering now for the value-added tax (VAT). After the FTA provides registration for VAT and starts Excise Tax on their website.

VAT in UAE has been changed the history of the United Arab Emirates (UAE) once it implements the starting of the year. VAT is a consumption tax that has been applied, at each stage, to all the goods and services that are mandated in the VAT Law or the Federal Decree-Law No. 8 of 2017. The VAT has generated the value that is added during the production process.

The VAT Registration businesses have the responsibility of having the reasonable and accurate documentation for the VAT-related affairs, But it's very important that how to VAT Calculation is done.

The failure to do the provisions stipulated in the landmark Federal Decree-Law No. 7 of 2017 or Tax Procedures Law, Federal Decree-Law No. 7 of 2017 or Excise Tax Law, and Federal Decree-Law No. 8 of 2017 or VAT Law, will face deeply penalties.

The formula to Calculate The VAT


The rate of VAT in UAE has been 5%, which is one of the lowest rates in the world. Since the government will not directly to collect the VAT, so the companies are going to charge them to the customers.

The formula for Calculating VAT is as follows:


VAT = Output Tax − Input Tax

Output Tax:


The Output tax is simply the VAT collected on selling goods or legislation services to clients.

Input Tax:


Input tax is the VAT that is paid on purchasing raw materials for the above-mentioned goods or services.

How to gather VAT as a Businessman?


All dealer who are confluent in the chain of production, which includes the supply of materials for production or the production process itself, should do the following:

  • Gather the VAT on the sales, which is output tax
  • Protect the amount of VAT that is paid on the purchase of goods, which is the input tax


Subtracting the input tax from the output tax will have the amount that will be paid to the government.

There are conditions wherein businesses can forward an instance to the government for a refund of VAT although not everyone is permitted to do that. In this case, the businesses will act as the government’s tax collectors.

Preparation and Registration as a VAT Collector


It is never an easy task to sense the concept of VAT in one go.

That's the reason why we are offering a free evaluation if you are in need of any help in regards to VAT registration and calculation in UAE.

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