VAT is a globally accepted transaction tax levied in GCC countries form First January 2018 at 5 %. Within 100 days of VAT implementation, there has been a total compliance of 98% according to Federal Tax authority of Dubai, a highest in the world.
Implementation and execution of VAT involves calculations at every transaction. Transfer of VAT from one hand to another hand generates two kinds of variations in it.
Output tax: A tax that is payable to the supplier of your goods constitutes Output tax.
Input tax: a tax that you receive from your buyers makes input tax.
Due to the formation of these two variations in the tax, there arises tax liability i.e.; the difference between the output tax and the input tax payable to the government.
Tax liability can be of two types: when output tax you have collected from the customer is more than the input tax you have paid to your suppliers, then you have to pay the difference between them to the government via tax return.
When the input tax you paid to your suppliers is more than the output tax you have collected from customers, then the difference can be claimed back from government or carried over as excess tax paid to the next period via a vat return
All these transactions and calculations come under VAT return filings.
They are done according to the compliance set by federal Tax authority of UAE which needs professional diligence and expertise. Failing to do so can result in a penalty from the government.
These calculations are done on the major transactions of VAT while dealing with government or another business. But there are many other calculations needed to be done within the company and also while calculating the VAT values of various products.
VAT values depend on the type of products and services. Variations in implementation of VAT are: