VAT Impact on Restaurants in the UAE

VAT stands for Value Added Tax which came into VAT implementation in UAE recently. This value-added tax is imposed by businesses at every step of their supply chain. The restaurants in the UAE have to charge 5% VAT on every food item they sell and this is irrespective of their cuisines. From Arabic cuisine to fast food, no matter what kind of food items a restaurant is offering, they have to levy VAT on the customers.

VAT Eligibility

Any business whose annual turnover is above AED 375,000 is eligible for VAT. In aggregate, if a restaurant collects AED 1,000 a day or above then that is eligible for paying the taxes.

Restaurants are known for improper book maintenance and with VAT in place, the restaurateurs should have everything in place now. They have to get registered with FTA to be eligible for VAT.

Tax Invoice

The VAT invoices are different and there are a set of rules that restaurants have to follow. FTA has already provided the template and every business have to update their invoicing software with that template now.

A clear breakup of the items that consumers ordered along with the tax 5% should be mentioned in the invoice. There is another simple version of billing that restaurants can opt for if they are unable to issue a normal invoice. Either way, the format has to match with the requirement of government under any circumstance.

Revision of Prices

Now, as the FTA started VAT system, it is important for the organizations to let their customers know about it. The restaurants have to put up revised prices so that they can collect the VAT amount from customers. 

There are two ways to let customers know that they are paying more tax.

1. Prices added in Menu:

The restaurateurs should add the VAT for the original price of an item and mention the updated price in the menu. The fast-food joints and other normal restaurants should go with this plan.

2. Mentioning VAT Extra in Footnote :

In fine dining restaurants, they can just print up a small footnote at the end of the menu stating that the customers will be charged 5% VAT extra.

This way it becomes easy to convey the new pricing for customers. No matter which option you choose, it is important to revise the prices of all your items and if possible keep the pricing in check as it is already hard for the restaurateurs to offer food items at a low price. It is important for you to get in touch with reliable VAT consultants in Dubai who can help you with filing

We are an approved and registered VAT consultants in Dubai, UAE with Certified VAT experts by the Federal Tax Authority (FTA). Understanding the concept of the tax is the first step to compliance and we do support for VAT RegisterationVAT return filingVAT auditingVAT Advisory services in Dubai, UAE. Make sure your business is VAT-ready with the help of KBA – the trusted VAT consultants in Dubai today.

Expert VAT Consultancy in UAE for all Your Businesses

KBA Accounting and Bookkeeping Services LLC is an industry-leading accounting and consultancy firm in Dubai. Offering comprehensive VAT consultancy with VAT Experts and VAT return filing solutions to companies all over the UAE. We help educate businesses on the financial impact of tax to goods and services, and the measures they can take to mitigate the effects. We can guide businesses on the steps to proper taxation compliance, vat refund and adoption including the necessary updates to accounting systems and databases.

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