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There is an interesting quote in the celebrated American Novel' Gone With the Wind': "Death, taxes and childbirth! There's never any convenient time for any of them". In terms of VAT in the UAE, businesses owners should stamp these words in their mind as complying with various VAT-related requirements is critical. Taxpayers should comply with obligations such as VAT registration in UAE, tax return filing etc., and as the quote states, there is no “convenient time.”

Taxpayers must ensure that the VAT is properly accounted for, collected to be paid to the Federal Tax Authority (FTA) to avoid hefty penalties.  Major penalties would seriously impair the business image among customers, authorities and banks. Recurring penalties doesn't augur well for maintaining a strong cash flow, especially for SMEs and startups. Creating a strong business image by ensuring VAT compliance is not a big deal if the taxpayers enlist the help of the best tax consultants in Dubai, UAE. However, the businesses should ensure that they are well-versed with the key VAT compliance areas that are listed here.

The Threshold of VAT Registration in the UAE

Three years have passed since the introduction of VAT, but there are many companies that overlook the importance of VAT registration in the UAE. With the help of tax agents in Dubai, the business owners can assess whether they are required to register for VAT in the UAE. As per the VAT law, taxable persons must register for VAT if their taxable supplies and imports exceed the mandatory threshold of Dhs375,000 per annum.

Businesses can opt for voluntary VAT registration if the taxable supplies exceed Dhs187,500 per annum. Executive Regulations of the Federal Decree-Law No (8) of 2017 on VAT states that a taxable person who is eligible for mandatory registration must file an application to the FTA within 30 days of becoming eligible. Failure to file for UAE VAT registration within the stipulated time-frame leads to a hefty fine of Dhs20,000.

Maintaining Accounts & Records for VAT

The UAE VAT Law mandates that the tax registrants should maintain the accounting books for at least five years after the end of the tax period to which they relate. The companies need to maintain a record of all the outward supplies, tax invoices for inward supplies, records of goods/services imported, records of goods/ services exported, tax credit notes, records of goods/ services disposed of or used etc. Record keeping for VAT is an arduous job, but it can be easily navigated with the help of the best VAT consultancy firms in Dubai.

Filing Returns on Time is Crucial for Businesses

Taxable business in the UAE must file their VAT Returns to the FTA within 28 days after the end of the tax period prescribed for each business. Companies must be well-prepared for filing VAT returns to the FTA since the filing process has to be performed online through the FTA portal. A form called VAT201 has to be filled, which can be accessed on the FTA portal.

Businesses need to take extra care while filing the VAT returns because incorrect tax submissions are liable to a penalty of Dhs3000 for the first time and Dhs5000 in case of repetition. Inaccurate VAT return also attracts a percentage-based penalty on the amount unpaid to the FTA due to the error. Failing to submit the VAT returns within the time-frame will attract a penalty of Dhs1000 for the first time and Dhs2000 in case the violation is repeated. Businesses file their VAT returns through FTA-approved tax agents in Dubai to avoid errors and penalties.

Ensure VAT Compliance, Beware of FTA Tax Audits

The FTA can conduct an audit on businesses to ensure the companies are complying with VAT. During a tax audit, the FTA officials will inspect the tax returns and other related information, which requires the business owners to maintain the records properly. As per the tax procedures law, the FTA can carry out the tax audit any time for any reason, but the Authority will notify the businesses five-days before the audit commences.

The FTA will review accounting systems, output tax, input tax, and VAT returns. The businesses and their tax agents in Dubai or UAE are required to cooperate with the FTA officials during a tax audit. If the businesses don't help in facilitating the work of a tax auditor, a penalty of Dhs20,000 will be imposed. Taxable businesses should consult with registered tax consultancy firms in Dubai who will help the companies prepare well in advance for a tax audit.

How to Ensure Value Added Tax Compliance in the UAE?

Businesses can't afford to take chances when it comes to ensuring VAT compliance in the UAE. Maintaining proper records and filing accurate & timely VAT returns are critical compliance areas that help the companies build a positive image before the FTA and other concerned authorities. Businesses often struggle in terms of VAT compliance; however, the services of registered tax agents in Dubai is a robust solution for their concerns.

Jitendra Chartered Accountants (JCA) has been at the forefront of delivering efficient VAT compliance solutions for businesses of all sizes in Dubai, UAE. JCA's tax agents in the UAE are registered with and approved by the FTA, which equips them to make the right advice to entrepreneurs or investors. JCA's assistance enables companies to ensure business success by ensuring VAT compliance cost-effectively in the UAE.