The VAT was introduced in the UAE in the year 2018. The businesses in the UAE are required to comply with the guidelines issued by FTA for VAT. Filing for VAT is a mandatory requirement for VAT registered companies in the UAE. However, the companies need to be very careful while they are filing their VAT returns as even a small error can result in heavy fines and penalties. Therefore, the focus of his article is to highlight some of the common errors that companies make while filing their returns and how these mistakes can be avoided. One must consult VAT registration UAE, in order to ensure that the return filing procedure is as per the latest Federal Tax Authority guidelines.
Defining VAT return filing in the UAE
The Value Added Tax system in the UAE is based on the consumption of goods and services. the purpose to introduce VAT was to compensate for the decrease in the revenue that was coming from the oil and gas industry and the amount that used to be received was reinvested in the development of the infrastructure. The businesses that are registered for VAT with the FTA collect VAT on behalf of the authority whenever a sale happens and then they make the payment to the authority within a specified period of time. When the businesses make the payment, they have to file the VAT return with the FTA to confirm the tax payments. This system ensures that the VAT is being collected at appropriate points of sale and is being returned to the government on time.
Common errors made while filing a VAT return in the UAE
Now let’s discuss the most common errors made by businesses while filing VAT returns.
- Failure to record zero-rated and exempted sales
The businesses in UAE are correctly filing the output and input VAT along with the VAT payables as well as receivables. Where they go wrong is that they miss out to record and file the zero-rated and VAT-exempt sales. The businesses are supposed to identify the zero-rated and exempt sales and these must be reported correctly to the FTA without fail.
- Not maintaining proper records
The Federal Tax Authority has mandated all VAT registered firms to maintain proper records of all the transactions at least for the past 5 years. The records include purchase and sales records, receipts and payment records, import and export receipts, bank statements of credit and debit transactions, salary and benefits records of the employees, VAT, and ledgers of the company, etc. all these must be recorded and maintained properly. They also need to be updated on a regular basis.
- Missing or delaying the VAT return filing
When a company or a business in the UAE gets registered for VAT with the FTA, they are communicated clearly regarding the deadline for filing of the VAT returns. The businesses have to be compliant with it and are required to file their VAT returns on or before time. They should ensure that they do not miss out on their VAT filing date or should not delay the filing process. In order to avoid confusion and to ensure a smooth filing process, the companies must ensure approach the tax consultants in the UAE, so that they can help them out in making the process smooth.
- VAT calculation errors
The businesses should also find out a way to ensure that they apply the correct VAT calculations on the goods and services sold by them. Incorrect calculations can result in huge costs for the firms such as fines and penalties. The businesses are also expected to keep themselves updated with the latest applicable VAT rates while performing these calculations.
- Reverse charge mechanism transaction errors
The reverse charge mechanism transactions are applicable in the cases where the firm imports goods and services in the UAE from other countries. In such cases, if the tax number is linked with the customs code, and it reflects in the accounts of the entity, it becomes easy for the accountant to account for VAT. However, usually, the firms do not link their tax number with the portal and hence issues arise while claiming the input VAT. The businesses in the latter case forget to include the transactions in which the reverse charge mechanism is applicable and they may assume that these goods and services have no VAT costs. These import transactions are reflected on the customs portal and hence the firms need to be careful while noting these transactions and must approach VAT registration UAE in case they have any confusion related to these transactions.
- Lack of planning and strategies in the businesses with regards to VAT compliance practices
The VAT was introduced recently in the UAE and hence the whole concept is new to the businesses. It might be difficult for businesses to understand compliance with the guidelines laid out by FTA strictly. Therefore, businesses in the UAE are advised to implement a proper strategy to implement the VAT rules into their system. Since the system might sound a little complicated for most businesses, they must hire VAT consultants in the UAE who can guide them properly and keep them updated with the latest amendments in the VAT laws. The companies must also carry out VAT health checks which keep their VAT-related procedures in accordance with the latest guidelines. These VAT health checks avoid any fines and penalties for the companies and are carried out by the VAT consultants in the UAE.
How VAT registration UAE can help you in avoiding common errors made while filing a VAT return in the UAE?
We, at VAT registration UAE are always ready to offer our services to the businesses and firms in the UAE with respect to VAT-related procedures. We have a specialized and experienced team who always ensure that the businesses who approach them for help do not suffer from losses and heavy fines. VAT registration UAE will help you in avoiding the above-mentioned common errors made while filing a VAT return in the UAE by ensuring that all the records are maintained properly and by ensuring that no delays are done in filing VAT returns. Being one of the most preferred and leading VAT consultants in the UAE, we ensure you a hassle-free and easy return filing. Contact us today and one of our team members will give you a call to assist you with your error-free VAT return filing process.