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VAT for Businesses

With the introduction of VAT in the UAE, there are considerations that businesses would have to keep in mind. Here’s clarifying doubts that you as a company might have.

How will VAT be collected?

Businesses are required to document their earnings and expenditures germane to VAT.

Registered businesses shall:

  • Charge a VAT of 5% to their customers
  • Incur a VAT on goods and services that they receive from their suppliers The differential between these two amounts shall be paid to or reclaimed from the government, as applicable.

Which businesses should register for VAT?

For businesses whose value of taxable goods and supplies exceed AED 375,000, it is mandatory to register for VAT. For businesses whose value of taxable goods and supplies is less than this threshold but over 187,500, registering for VAT is optional.

When are registered businesses required to file VAT returns?

Registered businesses must file VAT returns with the FTA on a regular basis, within 28 days of the end of the tax period, as mentioned in their VAT registration certificate or the official tax website dashboard.

VAT returns can be filed using online services.

How to file VAT returns?

VAT return filing in the UAE will be online – manual returns are not acceptable. The e-filing of VAT can be undertaken on the web portal of FTA. The e-services section offers the option for VAT return filing. VAT returns should be filed every quarterly or monthly; delay in filing returns is liable to attract penalties by the tax authorities.

What kind of records are businesses required to maintain, and for how long?

It is mandatory for taxable businesses to maintain books of accounts under UAE VAT law. In addition to that, the authority can ask for additional documents such as annual accounts, general ledger, purchase day book, invoices issued, invoices received, credit notes, debit notes, VAT Ledger, etc.

Under the UAE VAT law, the books of accounts and records are to be maintained for 5 years.

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Can businesses offset customs duty against VAT payments?

VAT is payable over and above the custom duty paid by an importer. VAT shall be computed on the price of the good/service including custom duty.

What if a business doesn’t follow VAT?

Penalties shall be imposed in case of non-compliance. Non-compliance could mean:

  • Failing to register for VAT if you fall in the taxable category
  • Failing to submit VAT return or pay the VAT within the allotted period
  • Failing to maintain the records required as per the tax legislation
  • Evading VAT

VAT would come into effect in the UAE from 1 January 2018. Companies with an annual turnover of over AED 150 million are urged by the authority to register for VAT before October 31, 2017, and those with an annual turnover of over AED 10 million are advised to register before November 30, 2017.

We at Commitbiz have our team of experts to help you with company formation, registration and counselling. For any queries on VAT or tax consultation for companies in the UAE, feel free to reach out to us.

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