Exploring

Understanding the intricacies of the rules around taxation and amending your systems to comply with the legislative requirements can be quite a challenge. This is particularly true in the context of the environment of the Middle East region, where many businesses have had no previous experience with reporting and paying taxes. There is a need to understand the complexity of dealing with taxes for operations within the country, while the difficulty arises even more so with exporting and importing goods and services between other GCC countries and the rest of the world.

The introduction of VAT has changed all aspects of doing business in, through and with UAE based companies. As a growing trading hub, the impact of eventual distortions will have to be recognized by businesses proactively.

Going from an informal to a formal system of accounting poses multiple challenges. From setting aside the appropriate amounts for the VAT to timely detailed filings to cash flow management, the daily considerations are numerous and overwhelming. Improper actions, even in the case of a genuine mistake, can lead to fines as large as 20,000 AED. These fines can be devastating to small businesses, and without a tax agent to manage it, the time lost on a case can cost the business even further.

Value Added Tax is one of the simplest indirect methods of taxation. The complexity arises when certain industries are preferentially rated or exempt from taxation. This leads to ambiguities and the finer details must be kept in mind during every step for compliance. Policies must be enacted to maintain daily operations and management of records to avoid exposure to risk and penalties. Second-time offenses lead to increased penalties, allowing no room for mistakes.

Furthermore, there must be a review of the process and technical aspects of the law as and when the tax legislation is updated.