VAT Law in UAE mandates vat implementation for restaurants. The main idea behind the implementation of VAT is to increase the number of sources of revenue flow, bring a stable position for all businesses in UAE. Vat registration is important for restaurants in UAE. If you are a business investor or an entrepreneur who wants to set up a restaurant business in UAE, then you need to be aware of certain essentials.
Also Read: Applicability of VAT for Goods Supplied to Designated Free Zones
What are Criteria to Register VAT for Restaurants?
The criteria to register vat for restaurants in UAE are as follows
• If taxable supplies exceed AED 375,000, then businesses should register for vat.
• If taxable supplies are between AED 187500 and AED 375,000, then the businesses can undergo voluntary VAT registration.
To know more about the threshold limits or unsure about whether to register for VAT, you can seek the advice of a VAT expert in UAE
How do Restaurants Implement VAT?
Restaurants have 2 options to display prices in their menu
• Display prices inclusive of VAT
• Display the prices in the menu with a footnote on each page that mentions 5% VAT applicability on items.
To understand both scenarios seek the help of VAT experts in UAE.
VAT Paid on Input Credit
The Restaurants can obtain input credit on the VAT paid on expenses incurred. Here are the general Input Tax Credit that can be availed by a restaurant in a regular scenario:
• For purchase of ingredients
• Rent for the restaurant
• Delivery vehicles
• Fixtures and furniture of the restaurant
• Kitchen equipment
• Office equipment
• Stationary items
Maintaining Books of Records
Taxable persons are required to retain vat invoices for at least 5 years enabling the Federal Tax Authority to identify business activity details and review all transactions. Restaurants can seek help from VAT experts to meet the invoice requirement as per the FTA guidelines.
VAT Return Filing for Restaurants
Each taxable person shall:
• Submit the tax return to the authority in accordance with the provisions of VAT law
• Settle any payable tax as specified in the tax return within the time frame specified in the tax law.
Hiring a tax expert can help restaurants to file VAT returns on time and can avoid penalties caused due to delay in filing of tax return in UAE.
Penalties for Noncompliance with VAT Laws
In case of noncompliance, the FTA may issue a tax assessment. The authority shall issue an administrative penalties assessment and notify the business about the various committed mistakes within 5 working days. Such administrative penalties shall not be less than 500 dirhams for any violation and shall not exceed three times the amount of tax in respect of which administrative penalty was levied.
Restaurants should consult with a tax agent in UAE in advance to avoid incurring penalties and implement VAT successfully.
Hiring a vat expert will enable restaurants to prepare and implement for tax policy in UAE.
VAT Registration Services in UAE
It is advisable to take expert opinion while dealing with the implementation process. Farahat & co is a tax consultancy firm in UAE that provides its clients with valuable assistance in understanding the VAT regulations in the country. Our experts can help in simplifying the VAT regulations and its provisions. Contact us today to get the vat assistance.