Value Added Tax (VAT) is charged on the consumption of goods and services. Be it a new business or an established business, filing for a VAT return can be a very benefitting act for the business as it helps in creating a good image of the business in the eyes of the government as well as the investors both present and potential. Today, VAT has recognized the world over and more than 180 countries have accepted this procedure.
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 processes 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?
Many a time the business may pay extra taxes like Value Added Tax (VAT) but later on, such taxes can be reimbursed. This process is known as VAT Return Filing in which the business states how much extra it paid to the concerned authority.
In simple terms, VAT return filing states how much VAT is to be paid or reimbursed by the tax authorities to the business. 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 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 Due/Liability?
The taxpayer is responsible for calculating the VAT return during the filing process. It is calculated considering the following factors:
- The total sales and purchases of your business in the relevant return period
- The amount of VAT you owe for sales
- The amount of VAT you can claim for the purchases made
In the end, if you owe more VAT than you are able to claim, then you need to pay the difference. If the situation goes the other way round then you can either ask for the refund of excess VAT or can carry forward the excess to the next return period.
Who Should File VAT Return?
All businesses which have already registered for VAT are required to file VAT returns, irrespective to the type of VAT registration or sales, purchases, output tax, input tax, etc. To make no mistakes while filing returns, the management can avail the assistance of professional consultants.
How to File VAT Return in UAE?
Businesses can file their VAT return on the online portal using the Federal Tax Authority (FTA) portal, where one would find the VAT 201 form. To access this form, the taxpayer must log in to the FTA e-Services portal, and select the option VAT. Then a drop-down menu will appear from which the business has to select VAT 201. After this the business must select VAT Return in the navigation menu.
In short, the business must do the following: VAT > VAT 201 > VAT Return
Here, one is required to fill in the information regarding the following:
- Details of the taxable person
- VAT return period
- VAT on sales and all other outputs
- VAT on expenses and all other inputs
- Net VAT due
- Any other reporting requirements
- Declaration and authorized signatory
Once the form is duly filled and submitted, the taxpayer would receive an e-mail from the FTA confirming the submission of the VAT return form. After submitting the return, the tax payer has to pay the due tax, if any, through one of the various payment channels like E-dirham, exchange houses, online bank transfer, over-the-counter bank payment, etc.
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 track of their filings.
3. VAT on Sales and All Other Outputs
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 need 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
- VAT compliance brings along with it certain business goodwill. In fact, many large firms are often reluctant to conduct business with companies that aren't VAT-registered
- The business image gets highlighted once registered under VAT law
- VAT is easier to manage as compared to any other indirect tax
Thus, you can see how important it has become for business entities to implement the 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 a 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 VAT 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 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.
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How Can You Prepare For VAT In UAE?
Basic Requirements of VAT Registration in UAE
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VAT Consultancy Services in Dubai
VAT Rates for Different Industries in the UAE
All you need to know about VAT in UAE