What is VAT?
Value added tax (VAT) is the consumption tax applied on a product when a value is added to it. This implementation of tax carriers on throughout the process from manufacturing the product to selling it to a consumer. For example, putting together various parts to create a product is adding value to the product.
Similarly, intellectual knowledge and skills of an individual or a group of people can also be categorized as value added. The calculation of the total value added by an industry helps the economists recognize the contribution of that industry to the country’s gross domestic product (GDP).
VAT Designated Zones
From 1st January, 2018, UAE has implemented Value Added Tax in specific regions in the UAE. Several free zones, listed by the Cabinet Decision, in the UAE are now known as designated zones that apply VAT with certain limitations.
The VAT will be implemented under strict regulations in the UAE. These designated zones are to be fenced off, which will help maintain security in the regions. Furthermore, tight security control will be put on the good and people that move in and out of the designated zones. The goods will have proper customs procedure to go through to be imported and exported in these designated zones. Some specified supplying of goods will be treated as being in foreign land for VAT purposes.
The purpose of VAT designated zones is to manage only international trade businesses on the basis of VAT. Other businesses that are being set up on such free zones to avoid the payment of tax will not be allowed in the designated areas.
Although the supplying of goods will be administered with the strict polices that are out of the range of UAE VAT in these designated zones. The supplying of services will follow the rules of the regular VAT administered in the UAE.
For commercial businesses, VAT in UAE is dealt with by applying policies outside of the regular UAE VAT regulations. The import and export of goods within UAE are not applicable for VAT until they are being used in the manufacturing of supplies that are eligible for tax.
These supplies are not to be altered with or used during their transfer between the designated zones. Good owners are to follow the customs procedure set by the GCC Common Customs Law. Regular UAE VAT is not applied on these transfers.
We can provide guidance
Services for company setup in UAE have been on the rise in the UAE. The country has had Dubai as an active business hub for more than three decades. Furthermore, the country is slowly transforming other cities, such as Abu Dhabi, into business hubs as well. Therefore, more foreign investors have been entering the country with ideas of setting up their own business in Dubai.
However, without the proper knowledge of operating a business Setup in Dubai and the regulations set by the UAE government in regards to the business, the new invests will go to waste.
As a result business consultancies have been established, that are helping entrepreneurs with company setup in UAE. Business Formation Dubai is a consultancy that helps investors and entrepreneurs in establishing their own business Setup in Dubai. The company educates their clients of the different types of business options available for them to explore. Moreover, Dubai Trademark Registration provides PRO, bank account opening and other business related services for the clients. This is to ensure that the clients do not have difficulty in the process of setting up business in Dubai.
Call to action: We are ever-ready to help you with your idea of a business setup. Call us or send us an email.