Categories of VAT:

It is of utmost importance that the companies are aware which products they offer fall in which categories of VAT.
Once the products are categorized companies should treat each of them differently for example:-

Make sure 5% VAT is charged on standard products:

  • Need to Register for VAT
  • Need to charge customers 5% VAT
  • Can recover VAT paid on purchases
  • Most companies fall under this category

Make sure only 0% VAT is charged on 0 rated products:

  • Need to Register for VAT
  • Need to charge customers 0% VAT
  • Can recover VAT paid on purchases
  • Categories like Education & Healthcare services, Export of Goods outside GCC, International Transportation, investment in Precious Metals, Supplies of means of transportation, newly constructed Residential Properties, e-commerce outside GCC & Int. roaming services.

Make sure VAT is not charged on an exempt product:

  • Do Not Need to Register for VAT
  • Cannot charge customers VAT
  • Cannot recover VAT paid on purchases
  • Categories like Life Insurance, sale of Residential Properties, Bare Land & Local Passenger transport.

If this is not done the FTA can levy penalties on the company.

We, at msi Alnoman and Ravi, are qualified to assist you through every step for your business. Our thorough knowledge in this field is ideal to guide your business, minimizing risk, to benefit your business.

Stay posted to know more about other VAT rules.To find more information on VAT you can visit the following:–

  1. Ministry of Finance
  2. Introduction to VAT
  3. Understanding VAT
  4. What do we need to when VAT comes into effect?
  5. Special VAT rules
  6. Reverse Charge Mechanism

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