Value Added Tax or VAT was introduced in UAE on 1st January 2018 with the aim acquiring a new source of income which would help the government in the achievement of its vision of reducing the dependence on oil and other hydrocarbons as a source of revenue.
The VAT is considered as a general consumption tax and will apply to the transactions in goods and services throughout the UAE, with a limited number of exceptions. Since it has been recently introduced, the business owners are not so clear on the rules and regulations set by the government. This has led to a rise in the number of vat experts in UAE.
Here is a comprehensive guide to all you need to know about VAT in the UAE.
What is VAT Return Filing?
VAT return filings are the submission of the official tax documents to the relevant tax authority, which is the Federal Tax Authority (FTA). A registered entity should file for VAT depending upon the tax period. The filing shows if there is any tax due or any reimbursement to be done to the business entity. If the taxable person is unable to file for taxes, the entity has the freedom to authorise any other person on his behalf which usually is a Tax Agent of a Legal Representative.
Norms for VAT Return Filing
The UAE government has set some rules and regulations for the filing of vat which every business should follow:
- For companies with an annual turnover of over AED 375,000, it is mandatory to file for a tax return.
- For businesses with an annual turnover between AED 187,500 and 375,000, it is voluntary to opt for VAT registration and filing.
A business has to pay VAT to the government equal to the amount which it collects from the government, at the same time they receive a refund from the government on the tax paid to the suppliers of the business.
- Foreign businesses also have the option to get back the VAT they incur while visiting the UAE.
When is a business supposed to file VAT return?
Every VAT-registered business must file for VAT returns with the FTA on specific periods which are within 28 days of the end of the tax period which is defined for each type of business by the government. A tax period is a definite time for which the return is filed. A tax period is a pre-defined duration of time for which the payable tax is determined and paid. The standard VAT period in the UAE is:
- Businesses with an annual turnover below AED150 million must file for a return every quarter.
- Businesses with an annual turnover below AED150 million or more must file for return every month.
Consequences of Failing to file its VAT return?
According to the provisions of Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE, if an entity fails to file VAT returns on due time, it will make the entity violator of the provision and will be accountable to the penalties as per the government of UAE.
The late filing of VAT return would result in a penalty of AED 1,000 for the first time a delay happens. This penalty would increase on any subsequent non-compliance of the VAT return filing.
How to file a VAT return?
The VAT tax returns need to be filed online. The steps to file VAT return are as follows:
- The businesses must first register on the VAT portal on the end of which they will be provided with usernames and passwords
- Login to the e-Services portal of the FTA (tax.gov.ae) and then log in using their registered username and password
- Navigate to ‘VAT->VAT 201–>New VAT Return’ option in the e-services section to initiate the VAT return filing process
- The first two sections are auto-populated. The taxpayer must provide details of standard-rated taxable supplies, tourist tax refunds, etc. in the third section.
- The fourth section in the VAT201 form requires taxpayers to provide details of inputs and expenses on which the standard 5% VAT has been applied and are liable for reverse charge and also fill the eligible input tax that can be recovered.
- In the fifth section, the due or recoverable tax for the period is calculated
- In the last and final part, signatory details need to be given by the taxpayer such as name, phone number, submission date, etc.
- The form is now complete and can be submitted. The submission of the form will lead to a confirmation email in your e-mail account.
A Few Points to Keep in Mind While Filing Your VAT Return
The filing of VAT is very easy and straightforward. However, while filing, we need to keep certain points in mind.
- The entered amount must be denoted in Dirhams and should be rounded off to the nearest multiple of ten.
- If you do not declare any VAT, use “0.”
- Make sure to fill in all the mandatory fields in the form
VAT filing is an essential process to be performed by the business as it not only helps the business’ growth but also gives a proof of the existence of the company. It helps in eliminating the chances of any uncalled-for financial loss. If you are looking for a tax consultant in Dubai, then we have a perfect solution for you.
JAXA | Your VAT Return Filing Guide
JAXA is considered a leader in providing accounting and taxation services to various start-ups and businesses at a global level. We understand the varied requirements of our clients and provide customised services to all of them. If you are looking for VAT consultancy services in UAE, we can help you out. To know more about VAT filing in the UAE and other VAT related services we provide, do contact us – we’d be glad to assist you.