How do you ensure your business is compliant with UAE Value Added TaxAuthor businessconsultantsdubai
After the introduction of VAT in the UAE it is mandatory for businesses in UAE to have complete knowledge on the application of VAT on their business activities and corresponding policies of the taxation system. If you are going for new business setup in UAE, it is high time you ensure you are on the right track of getting your business tax-compliant.
1. Registering for VAT
Mandatory registration limit:
All UAE resident businesses must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.
Voluntary Registration Limit:
A business has the option to register for VAT voluntarily if its supplies and imports are less than the mandatory registration threshold of AED 375,000 but exceed the voluntary registration threshold of AED 187,500.
A business can also register voluntarily if its expenses exceed the voluntary registration threshold.
Know the difference between exempt supplies and zero-rated supplies
Although the standard VAT rate is levied on most business products and services; some key goods and services deemed vital to the economy do not incur VAT. They are either 0 rated or exempted from VAT.
Suppliers of goods and services that are zero rated can reclaim VAT if they have paid on inputs into their business. Suppliers of exempt goods and services do not have to register for VAT but, they cannot reclaim VAT they have paid on inputs.
Article 45 of Federal Decree-Law No. (8) 2017 on Value Added Tax describes the following supplies being subject to VAT at zero-rate:
- Export of Goods and Services
- Exported Telecommunications Services
- International transportation services for Passengers and Goods
- Supply of certain means of transport
- Buildings Specifically Designed to be Used by Charities
- Precious metals
- Converted Residential Building
- Education Services
- Healthcare Services
- Statement of Reverse Charge (if applicable)
A business should secure a record of above mentioned zero rated supplies in VAT account as they are still taxable. This will reflect on your tax returns.
Article 46 of the Federal Decree-Law no. (8) 2017 on Value Added Tax describes the following supplies as non-taxable; hence, they are qualified for VAT exemptions.
- Certain Financial Services
- Local Passenger Transport
- Bare Land
- Residential Buildings other than zero-rated
You are not required to register for VAT if all your supplies are exempted.
2. Accounting Software
In order to be VAT ready in the UAE, all businesses will need to record their transactions and will have to up to date their accounting software package. Following requirements must be met by VAT registered businesses,
- Charge VAT on taxable goods or services they provide
- Lodge claims for VAT they’ve paid on business-related goods or services
- Maintain accurate business financial records for at least 5 years, which will allow the government to check and confirm the accuracy of VAT payments and claims. The records include,
- Records of all supplies and Imports of Goods and Services
- All Tax Invoices & Tax Credit Notes issued and received
- Records of Goods and Services disposed
- Records of adjustments or corrections made to accounts or Tax Invoices
3. VAT Returns
As a VAT-registered business in UAE, you are required to report the amount of VAT you have charged and the amount of VAT you have paid to the government on a quarterly basis within 28 days from the end of the tax period according to the procedures mentioned in the VAT legislation.
You should not skip or delay the process of filing your VAT Return as this will consequently result in penalties that are imposed by the Federal Tax Authority (FTA).
4. Penalties for non-compliance
Each fine or penalty is not less than AED500 but not more than thrice the value of the tax on the transaction in question.
Businesses should ensure that their VAT returns are accurate and free from errors.
With the help of Business Consultants Dubai, you need not to worry about being exposed to any impending penalties. Our financial experts help businesses with VAT Services, Accounting and Bookkeeping, Auditing Services among others.