What Effects Will the New Value Added Tax Have?
The Value Added Tax will take effect in the United Arab Emirates beginning January 1, 2018. A flat 5% tax will be levied on many consumer goods while some sectors such as education, healthcare, transportation, real estate, and oil and natural gas production are either zero-rated or exempt. But not all expenditures, even in these categories, some are exempt or zero-rated, so care should be taken to understand the new tax. In healthcare, for example, some medicines may be taxed, and procedures undertaken for cosmetic reasons are subject to the tax.
What will the VAT mean to business? To the consumer?
Prices will likely rise, as companies incorporate the taxes into their business models. The actual burden of the new tax will almost certainly be passed through to the consumer, but businesses will face additional costs as well. Already, there is speculation and discussion of salary increases to match the extra costs the consumer will face.
Businesses will be responsible for the collection and accounting aspects of the tax. This means an additional administrative expense for almost all. Also, greater care in planning purchases will become necessary in order to limit unnecessary expense. Differences in hiring practices may arise. Many businesses could seek outside accountants who specialize in the necessary record keeping and analytic skills for their business accounting needs. This may help alleviate the demand for higher salaries speculated to be coming, and also will give businesses the extra care and expertise of specialists who know and understand the accounting, finance, and tax fields, without bringing some of the additional expenses that come with hiring someone in-house.
Specifics of the new tax are many and complex. The accounting professionals at Legends Accounting can use their knowledge to bring expertise and economy to your accounting cycle. Contact us today for more information.