VALUE ADDED TAX IN UAE [VAT]

Value Added Tax in UAE [VAT in UAE]

A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. 

If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid. VAT is used in more than 180 countries around the world. All OECD countries except for the US have VAT (or a variation). While it feels exactly the same as a general sales tax to end-consumers, VAT is a more sophisticated tax and overcomes many challenges that affect the general sales tax.

Value Added Tax avoids the cascade effect of sales tax by taxing only the value added at each stage of production. For this reason, throughout the world, VAT has been gaining favor over traditional sales taxes. Value Added Tax is assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale/purchase). The seller charges VAT to the buyer, and the seller pays this VAT to the government.

Value Added Tax was introduced in UAE from 2018 based on the GCC Common VAT agreement signed by all the GCC members.