VAT Filing for Startups in UAE: A Quick Rundown

What is VAT Return Filing?

VAT return filing is the submission of VAT returns. VAT-registered businesses in UAE are required in submitting details of transactions that are relevant to all taxable supplies. 

How do file VAT returns for startups?

With VAT returns filing, the taxpayer, which is the VAT-registered business, is required by the Federal Tax Authority in summarizing the details of the total output tax that is due by the business as well as the input tax recoverable by the business for a certain tax period. The information has to be provided on time to the tax authority to avoid penalties. 

A startup registered for VAT, whether mandatory or voluntary, has to provide specific details to the tax authority for VAT return filing:

VAT on sales – this includes details on sales, adjustments, and output VAT. All details of sales are to be separated in different categories such as:

  • Zero-rated sales; 
  • Exempt items and exports; 
  • Sales that are subject to reverse charge mechanism; 
  • Sales to VAT-registered businesses;
  • Standard rated sales 

VAT on purchases –details of recoverable input VAT and purchases are to be furnished. The details of input VAT and purchases are to be declared, including the following:

  • Purchases from suppliers that are not VAT registered;
  • Purchases that are exempt items or zero-rated; 
  • Purchases made that are subject to reverse charge mechanism
  • Imports that are subject to VAT, may be deferred or paid at customs; 
  • Standard rate purchases made locally 

Upon filing the startup’s VAT returns, the tax authority will provide a notification that acknowledges the submission of details required. An official receipt containing details of the filing has to be kept by the startup.

Details provided during the VAT return filing can be amended if there are errors; however, the tax authority has to be informed immediately. It is recommended to seek the help of a regulated tax specialist when informing the FTA regarding errors as there may be consequences to such that need to be addressed.

Tax Period

The tax period that is applicable to a VAT-registered business is three calendar months that end on FTA-set date. The FTA can, at its discretion, identify a specific tax period that is not the standard one for a certain group of VAT-registered businesses. In rare cases, a business may be required in filing VAT returns every single month. Where a VAT-registered business is assigned a standard tax period, it may request for the tax period to end with the month that is requested by the business. 

VAT Return Submission

The VAT return has to be furnished to the tax authority twenty-eight days following the date of the end of a tax period. Where payment is due onto the FTA, the tax authority has to receive such payment by the deadline the same as the aforementioned. If the due date set by the FTA for the VAT return filing and the payment falls on a national holiday or weekend, the deadline for VAT return filing and/or making the payment will be extended to the following business day. 

Also Read: Steps To Succeed With VAT Return Filing In UAE

VAT Return Filling in UAE

The Federal Tax Authority in UAE requires details that are summarized, which means consolidated details are needed for purchases or expenses, sales, input VAT, as well as output VAT. In addition, the details are to be submitted in the format that is prescribed by the tax authority. 

It can be very difficult for a business to collect, compile, and review all items that are relevant and necessary for filing VAT returns. With the assistance of experts, the business runs the risk of committing errors and- missing deadlines that eventually result to attracting hefty penalties from non-compliance. 

It is, thus, a must for all businesses, including startups, to consult with a regulated tax specialist in UAE. The expert won’t just help with the accounting of all VAT transactions, but you will also be provided assistance inaccurately and properly filing your VAT returns in the FTA-prescribed format. Call us today as we provide a free initial consultation with our regulated tax agents in UAE. 

What is the VAT Rate Currently Running in UAE?

In the United Arab Emirates, the current VAT rate is five percent and it applies on different products and services.

Can a Business That is Not Registered for VAT File VAT Returns?

There is no reason to file VAT returns if the business isn’t VAT-registered. In addition, a business cannot charge clients VAT if it is not VAT registered or if it is still waiting for the business to get its application approved. If you are waiting for FTA approval on your registration application, we suggest you utilize invoices and supply them to clients even without a tax registration number. You will find applicable transactions by your company to be eligible for VAT reclaim when it is VAT-registered.

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