Value Added Tax (VAT) is charged on the consumption of goods and services. Be it a new business or an established business, filing for VAT return acts as a savior and also holds a good image in the eyes of the government. Today almost more than 180 countries have accepted the procedure and this got spread worldwide at a faster pace. The Middle East countries, especially the United Arab Emirates, which has been tirelessly working on setting itself as a business hub, has understood the importance of VAT filing. Realizing this, the GCC countries have entered the VAT law and agreed at a VAT rate of 5%. If you are building your business plan for UAE, you should be aware of the VAT return filing and VAT related process existing there. Do have a look at the VAT filing terms and processes and why it got accepted at a global level.
What is VAT Return Filing and VAT Compliance?
In simple terms, VAT return filing states how much VAT is to be paid or reimbursed by the tax authorities. A VAT return is done quarterly and it helps the business to track the business VAT path.
VAT is also charged for business entities involved in the business activities with other countries. While carrying out these activities it’s better to be VAT compliant to avoid any kind of penalty that becomes a hindrance in the way.
How to Calculate VAT Return?
The tax authorities are responsible for the calculation of VAT return during the filing process. It is calculated considering the following factors:
- The total sales and purchases of your business in 3 months
- The amount of VAT you owe for sales
- The amount of VAT you can claim for the purchases made
In the end, if the difference between the two results in the scenario where you owe more VAT than you are able to claim, then you need to pay the difference. If the situation goes vice-versa, the tax authorities need to pay you.
Who Should File VAT Return?
In Emirates, there exist categories of businesses who need to file their VAT return based on their business turnover. Now, there exist two categories for the process of VAT return filing in UAE.
1. Mandatory VAT Return
This is applicable if your businesses turnover exceeds AED 375,000. This would result in a compulsion for your business entity to file for a tax return and failure to do so would result in the payment of the penalty.
2. Voluntary VAT Return
This is applicable if your businesses turnover is more than 187,500. Here, you would be given an option to choose for filing VAT returns.
How to File VAT Return in UAE?
Till now you have had a look at the options provided for business entities to file for VAT return in UAE. Let’s move ahead and see the VAT e-filing process. The steps include:
- Creation of e-services account
- Login to account
- VAT online registration form needs to be filled that includes the following 8 sections:
- About the applicant
- Details regarding the applicant
- Contact details
- Banking details
- Business relationships
- About VAT registration
- Review and Submit
What is VAT Return Form 201?
VAT 201 is a declaration that needs to be made by the end of every tax period. It reflects the VAT that the vendor charged on supplies or details for which he is liable to declare output and input tax. Let’s understand the contents of this form that makes it a very important document in the eyes of VAT law.
Sections under Form VAT 201
The details required to be filled in VAT Form 201 include the following:
1. Taxable Person’s Details
Initial details like Tax Registration Number (TRN) are required to be mentioned. In case if a tax agent is submitting the documents on behalf of the taxpayer, then Tax Agent Approval Number (TAAN) is required along with the tax agency name.
2. VAT Return Period
The VAT Return period is important for any business as it sets a deadline for filing a return and also helps the entity to keep a track on their filings.
3. VAT on Sales and All Other Inputs
The details regarding standard tax supplies need to be furnished according to the Emirates level.
4. VAT on Expense and All Other Inputs
Here the details regarding the purchases made needs to be furnished along with 5% tax.
5. Net VAT Due
This section includes two parts: the VAT payable and VAT recoverable.
The VAT payable section mentions the tax that is due to the tax authority during the tax period whereas the VAT recoverable section states the total value of input tax that is recoverable for the tax period. The deduction between these two sections would ultimately result in a sum that is net VAT payable or recoverable.
6. Additional Reporting Requirements
This section is important for businesses who have applied for Profit Margin Scheme during the VAT period. It doesn’t have any financial impact.
7. Declaration and Authorized Signatory
The authorized signatures need to be inked on the documents before submitting them for VAT filing. The tax-payer should cross-check the documents properly before submission. The option of saving the details under draft and submitting it later is available.
Benefits of Filing VAT Return
- A huge amount of tax is generated through the VAT
- It is easier to manage as compared to any other indirect tax
- It lowers the burden as it is collected in small amounts
- The business image gets highlighted once registered under VAT law
- Improved infrastructure to the nation
- Business efficiency boosts to the next level
Thus, you can see how important it has become for business entities to implement VAT filing process and also to become VAT compliant while carrying out multi-national businesses. VAT filing not only protects your business but gives a legal assurance and proof of your business existence and it holds an upper-hand in the arena of tax payments and avoids financial loss. Are you trying to figure out how to initiate the process? Well, we have a solution for you.
JAXA | Your VAT Return Filing Guide
JAXA has been working as a business consultant and has been continuously dealing with businesses helping them setting their accounts, taxation and finance domain. The firm has been delivering outstanding services that resulted in retaining satisfied clients at a global level. Some of our services include:
- VAT registration
- Filing returns
- Payment of return submission
- VAT recovery
- VAT compliance process
- Dealing with tax inspection
Dealing with VAT is a tedious process. Our business experts would start from the very scratch and make it much easier to deal with. JAXA strives to give you the transparency, control and a better understanding of your business dealing that would maximize your profit and lowers your expenses to a great extent. To initiate the process, do contact us – we’d be happy to assist you.