VAT for Business

VAT for business can have a profound effect on both the revenue and the working of the company. Here’s clarifying doubts that you as a company might have.

How will VAT for Business be Collected?

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

Registered businesses shall:

  • Charge a VAT in UAE 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.

VAT for Businesses: Who Should Register?

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

When to File VAT for Business?

Registered businesses must file VAT returns in UAE 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 in UAE?

VAT return filing in 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 in UAE. 

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.

Can VAT for Businesses be Offset by Customs Duty?

A VAT is payable over and above the customs duty paid by an importer. VAT shall be computed on the price of the good/service, including customs 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 a VAT return or pay the VAT within the allotted period.
  • Failing to maintain the records required as per the tax legislation.
  • Evading VAT.

A 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.

End Note

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.

Frequently Asked Questions (FAQs)

What is VAT, and why do businesses need to consider it?

VAT (Value Added Tax) is a consumption tax. Businesses need to understand and comply to meet legal requirements and avoid penalties.

How does VAT registration impact my business?

Registering for VAT is mandatory for businesses meeting specific criteria. It enables you to collect and remit VAT, affecting pricing and financial processes.

What are the critical VAT rates applicable to businesses?

Different goods and services may have varying VAT rates. Knowing the applicable rates is crucial for accurate pricing and financial planning.

How can businesses ensure VAT compliance in their operations?

Implementing proper accounting systems, maintaining detailed records, and staying updated on VAT regulations are essential for compliance.

What are the common challenges businesses face regarding VAT?

Businesses often encounter challenges like understanding complex regulations, managing cash flow, and adapting to changes in VAT rates. Seeking professional advice can help you navigate these challenges.