Not every country or region is the same in terms of business regulations, taxation and policies. There are some regions in the world like Europe, South Asia, and the Middle East, etc., where some countries have developed policies and agreements for some fixed rules and regulations. The purpose is to make trade and imports and exports easier.
Taxation is the most complicated matter in which a business organization has to follow the laws of the home country, and that of the host country too, in case of imports or exports. The businesses operating in the UAE have to be aware of its taxation system to avoid penalties.
What is VAT?
Value-added tax, commonly known as VAT, is the most common form of taxation implemented in the United Arab Emirates. This type of tax is applicable according to the value of the goods and services in a given time period.
What is Excise Tax?
Excise tax is the one that is implemented on specific goods and services. The tax amount is not applicable to the consumers but to the manufacturers or suppliers of that specific good or service. However, a small share of tax might be included in the selling price of that product.
Dig deeper into this article to explore a comprehensive guide about VAT and excise tax in the UAE.
Top 6 Points You Should Know About VAT and Excise Tax in UAE
Since the implementation of the VAT in the UAE, the general society thinks that it is the only taxation system in the country. However, it is not true, and some organizations or suppliers/dealers have to pay the excise tax in UAE too to follow the tax regulations. Knowing about these in detail is critical to stick to the laws and regulations.
Here are some of the major points you should know about VAT and excise tax in the United Arab Emirates.
1) Purpose of Tax
The first thing that you should know about value-added tax and excise tax in the UAE is that the purpose of tax implementation for both categories is different. Excise tax is implemented to discourage the sales of products harmful to human health. On the other hand, VAT is applied to generate income from the government, which will be used for public welfare.
2) Applicable Goods and Services
The second point that you should know about VAT and excise tax is that both of these are applicable to different goods and services. The excise tax is applicable to alcohol, tobacco, energy, and carbonated drinks. On the other hand, VAT is applicable to a vast range of goods, services, and businesses. Businesses usually hire the best VAT consultancy services in Dubai to ensure if they need to pay value-added tax and get expert guidance to fulfill their responsibility.
3) Rate of Tax
The next point you should be aware of regarding excise tax and value-added tax is the difference in the rate of tax. In the case of excise tax, the rate is 100% for tobacco, alcohol, and energy drinks, while it is 50% for carbonated drinks. On the other hand, value-added tax has three categories, i.e., zero-rated, standard rated, and exempt supplies.
4) Business Eligibility
The next point in the list that the business organization should know about excise and value-added tax is the eligibility of the businesses. In case of excise tax, the business manufacturing or dealing with alcohol, carbonated or energy drinks, as well as tobacco items are eligible to pay tax. The case is different for VAT as the organizations have to reach a threshold to be considered eligible for tax payment.
5) Tax Registration
One of the most critical points that you should know about excise and value-added tax is tax registration. In both of the cases, the business organizations eligible to pay the tax have to register for excise or VAT according to the goods and services they deal in. it is a bit complicated matter, as the organizations have to deregister too if they are not liable to pay tax anymore.
6) Refunds
The last thing that business organizations should know about excise and value-added tax is the difference in refunding. In most cases, the excise tax is not refundable. On the other hand, in the case of value-added tax, the businesses can claim a refund if there is a difference in the value of goods or services. You can hire the service of the best consultancy to take care of refunds with the help of experts.
Know about tax to fulfill your responsibility!
Paying taxes is one of the greatest responsibilities of business organizations. You cannot fulfill this responsibility until you are fully aware of the details of the tax. You still can commit a few mistakes that can earn you penalties. So, contact the experts to know and fulfill your responsibilities without committing mistakes or earning penalties.