With the implementation of VAT in the UAE, a lot of consumers are asking the main question: what is VAT or what is the meaning of VAT?
Value Added Tax (VAT), is a new consumption tax that is applied to customers at a point of sale. VAT came into effect in the UAE from January 1, 2018 at a standard rate of 5%.
For the UAE in particular, it is predicted that with the addition of VAT, it will help raise more than 12 billion dirhams in additional revenues during its first year of implementation. This VAT tax has been added with the government’s goal of diversifying revenues in order to make up for the reduction in oil prices.
YYT Group apply VAT
As a corporation, we have completed our VAT registration and will be applying and respecting the rules of the newly introduced VAT law by going through rigorous changes in our management, collecting the right taxes and pass it over the right government, as well as training our staff to have an extensive knowledge of VAT.
We have updated all of menus in accordance to VAT, effective from the 1st of January, 2018. It has been directly added to our prices and is reflected in the customer’s bill.
If you have any questions, you can contact us by email at firstname.lastname@example.org or visit the UAE Government’s website.
VAT in the UAE, how it works with restaurants ?
The impact of VAT on the Food and Beverage industry in the Middle East is challenging. According to the unified VAT agreement signed by the countries of the GCC towards the end of 2017; all food will be subjected to the VAT rate of 5%.
This means businesses in all sectors will have to complete their VAT registration online as well as adjusting their accounting and reporting systems to include all functionalities of VAT.
This additional tax comes soon after the UAE’s Federal Tax Authority announced a 100% tax on tobacco and energy drinks, followed by a 50% tax on all carbonated beverages.
One of the main challenges for F&B business in the GCC, such as the YYT Food Corporation, is to build tax determination and tax reporting process in the right way. Penalties for non-compliance may have a large financial impact on company business.
VAT reflection on the economy, services, and facilities
As previously mentioned, VAT is expected to have a positive impact on the economy of the UAE as it functions as an alternative revenue source for the government.
Although it will take time to see the long-term results take effect, as the implementation of the system will take time to be applied to all the different industries, VAT has been implemented in over 150 countries over the world and has proven to be a crucial source of revenue in developing economies. This is because it gives governments the chance to use the increased revenue to fund a variety of projects, and aiding economic growth as a result.
Part of this revenue will stem from an increase in the price of services and facilities around the country and not just goods.