Interesting Facts about VAT in the UAE

As an indirect, transactional type of taxation, Value Added Tax (VAT) has a significant impact onto the entire operations of a business including with the function of VAT itself. A company in UAE where VAT is implemented must ensure all relevant employees possess the appropriate skills and knowledge in relation to VAT in order for them to perform their roles.

It is most certain to affect the recruitment within the region where there was not any specialist around to oversee compliance activities and advisory services for VAT.  In order to find out the best size of the tax team that a business in the UAE might need, the country is slowly looking at data from international countries that have implemented this kind of taxation.

Based on research, there’s at least 2,000 tax specialists that are employed in Europe and 44 percent are employed by tax companies with the remaining 56 percent function as professional advisers. The research has also found that it is quite common for businesses and established companies aboard to have their own dedicated tax teams. As for UAE, businesses may want to consider having resources dedicated in overseeing not only VAT advisory but more importantly compliance activities with VAT schemes. Also, it is important to have it continue on an on-going basis.

The number of inhouse tax specialists that is typically required by a business will depend on its size and the industry it belongs. This also applies to the United Arab Emirates and the entire Gulf region. There’s a trend towards putting focus on expertise related to indirect tax in the market. With our research alone, we’ve found the total number of specialists on taxation in the UAE has increased and the proportion of VAT population that’s working inhouse also increased dramatically.

Common Operating Models

We’ve observed as well that large organizations have tax operating models which have grown increasingly focused to risks and obligations associated with indirect tax. A lot of businesses in the UAE have moved in introducing specific VAT operating models, controlling and defining the ways VAT can be managed within businesses. Most operating models for VAT in the country are centered in compliance. Compliance work for businesses is often performed:

  • With a cross between an external provider of VAT services in UAE and an inhouse specialist team;
  • By a dedicated inhouse taxation team;
  • Externally in full where VAT functions are completely outsourced onto third-party service providers.

We expect businesses operating in all other countries to follow the trend here in the UAE as well. This includes prioritizing compliance over strategic management of VAT in the short-term perspective.

Where there’s no senior tax specialist available like for instance a supervisor or head of tax, senior head of an accounting department will take on more strategic roles.

In-house VAT Functions

VAT implementation in UAE has to be approached in a careful and structured way. A business has to take into account the requirement of keeping it appraised of changes and developments that are relevant to them as well as for businesses to engage with the process. It will most certainly require comprehensive implementation, design, planning, and post-implementation monitoring of VAT processes.

In considering introduction of inhouse VAT function, there has to be thoughts given to issues including the following:

  • Resourcing constraints that are experienced within the business;
  • Complexity of business model and operations;
  • Technical expertise;
  • Process design, planning, and integration onto the business’ core activities;
  • Potential tech support required by the business;
  • Risk management and governance processes to be monitored, planned for and implemented;
  • Gathering, processing, and validation of data and requirements;
  • Monitoring of the business’ compliance to constantly changing regulations set forth by the authorities

Typically, inhouse VAT functions are being dedicated with specialist resources that focus on company compliance and supporting the business with more technical advice.

When it comes to having tax specialists making sure the business is fully supported and compliant to regulations related to VAT in UAE, a business may be unable to maintain the team as it can require a huge capital investment. Outsourcing VAT functions is the best solution for businesses with such issues. A regulated tax agent in UAE is also referred to as a tax advisor.

The expert will expand its role for your business as a tax preparer, preparing tax returns so you won’t have to file them yourself and make costly errors. An expert can also work closely with a business throughout a fiscal year in order to make sure that the liability of the business for tax is minimized.

When running a business in UAE, it can be difficult to manage every aspect of it, most especially taxation and compliance activities. Call us here in VAT Registration UAE so our team can address your needs!