Whether a voluntary VAT registered business, mandatory VAT-registered company or an entity registered as a tax/VAT group, all roads lead to Rome – VAT return filing. It can’t be helped if you are indulged in taxable activities as per FTA. Being VAT compliant is vitally important for any business especially if they don’t want to attract unnecessary penalties and hassles. And timely and appropriately conducted VAT return filing keeps you VAT ready and compliant. VAT return filing is part and parcel for any VAT-registered company in the UAE aiming to report the tax authorities (FTA) VAT collected and paid by the entity to the tax authority during the given specific time period. Usually filed quarterly, VAT return filing communicates about how much VAT is to be paid or repaid by the tax authorities and allows businesses to pursue the correct financial path.
Tax Return
Filed through the FTA e-portal, a tax return is a record of all of the financial transactions an entity makes within a particular tax period. The document is not limited to sales and purchases only. It also includes imports, exports, and exempt supplies, together with the VAT paid or received on every transaction. To generate this document a business needs to maintain all the invoices and proofs of transactions.
A taxable person is required to submit a tax return in the UAE in the prescribed format given by the FTA. Form Tax 201 is used for tax return filing. Every taxable entity must submit the tax return within 28 days from the end of each tax period in accord with UAE Tax Law provisions. They are also accountable to remit the amount of tax due to the FTA within the time frame specified by the UAE Tax Law i.e. within 28 days from the end of each tax period.
Tax Period
Every registered taxpayer in the UAE must generate and file a VAT return once every tax period which is either a month or a quarter (3 calendar months) relying on the prescriptions provided by the Federal Tax Authority on their VAT certificate. Whether monthly or quarterly, the last day to file a VAT return is the 28th day of the month following the end of the VAT return period. For instance, if you are filing a quarterly VAT return for the quarter that runs from July to September, then the 28th of October would be the deadline. However, the first return period for taxpayers whose tax year ends on 31st January and the last day of February will be 4 and 5 months respectively. Furthermore, if the due date for VAT return submission and the corresponding payment falls on a weekend or a national holiday, the deadline for filing the VAT return or making a payment extends to the first business day right after the holiday. In case the taxpayer doesn’t have any business transactions to show for the tax period, they are required to submit a “nil” VAT return on or before the due date. The VAT return filing period applicable to each of the taxpayers is available on the FTA portal. The taxpayers can refer to the FTA portal to be sure of the applicable VAT return filing period by signing in to their account using their login credentials.
VAT Return Contents
You will see two sections in a typical VAT return. The first one is the main section which requires the details of the taxpayer, sales, purchases, and net VAT due. And the second one is the additional reporting requirements section which applies only to certain businesses under specific conditions. This section comprises fields pertaining to the profit margin scheme, stock transfers and VAT paid in other implementing states.
VAT Record Keeping
Maintaining VAT books up to the hilt is what the doctor ordered for businesses registered under VAT Law in UAE. Not only does proper VAT record-keeping help one to steer clear of unnecessary tax payments but it also helps them stay up to date about all the information required to file a VAT return before the due date. Every taxable entity that is VAT registered must maintain its books of records for not less than 5 years. The process requires consolidated details of sales/purchase such as:
- Sales/purchase invoices
- Debit/credit notes
- Import/export notes
- Books of accounting
- Zero-rated supplies/purchases
- Goods issued for personal uses
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VAT Return Filing in the UAE: Penalties & Fines for Non-Compliance
There are no second chances in life but in UAE there isn’t even one. Get it right the first time or pay for your mistake. Missing your VAT return filing due date means huge penalties.
- Failure to submit VAT returns by the due date for the first time leads to a fine of AED 1000 (revised from AED 3000) which doubles next time if the mistake is repeated within the span of 24 months.
- The late payment penalty (for the first 30 days after the due date) triggered by failure to settle the stated VAT in the submitted VAT return by the due date is 2% which increases to 4% per month after the due day with a cap of 300%.
- According to new rules, taxpayers get 20 days to settle any underpaid tax before late payment penalties will apply, where additional VAT liabilities appear from a voluntary disclosure or a tax assessment. The due date for the calculation of the late payment penalties in this instance would be 20 business days following the:
- Submission of a voluntary disclosure
- Receipt of a Tax Assessment
- Taxpayers will be imposed a 2% penalty if the 20-day period lapses and they fail to pay, followed by a further 4% monthly penalty payable at monthly intervals one month from the due date. The cap on the penalties remains at 300%.
- Speaking of variable penalty where a voluntary disclosure is submitted before the taxpayer is notified of an audit by the FTA, it now ranges between 5%-40% depending on when the taxpayer submits the voluntary disclosure.
- 50% of the underpaid tax along with 4% of the underpaid tax per month from the due date of the VAT return will be levied from the taxpayer in the situation where an error is rectified after the taxpayer is notified of an audit by the FTA.
Adam Global: Your VAT Return Filing Expert in UAE
The threat of penalties always hangs over your head when you are doing business in Dubai, UAE like the sword of Damocles. Especially when you are non-compliant to any of the rules and regulations whether knowingly or unknowingly. However, there are ways to avoid them. And outsourcing complex affairs to experts is one of them. VAT calculations can be fiendish at times. Fines are absolutely inevitable if VAT return filing in UAE is not done with due care. Tackling VAT return filing in Dubai, UAE is a cumbersome process and the chances of making errors or any kind of non-compliance are higher than you think. With that said, we can’t deny the fact that VAT return filing needs an expert. The taxable entities must have thorough knowledge about the tax period and other requirements mandated by the FTA to ensure compliance while filing a VAT return in the UAE. Not every business has an in-house team of finance experts to deal with VAT functions. And it’s not something that can be performed by jack-of-all-master-of-none ones. That’s where experienced business and management consultants in UAE such as Adam Global come and help VAT registrants in the UAE to successfully navigate the intricacies of the process. With our qualified VAT compliance professionals by your side, you don’t have to worry about your various VAT related chores including VAT return filing.
If you are still sitting on the fence about whether to register for VAT or not. There’s nothing for it but to get expert advice. If your employees are not abreast of any updates in VAT procedures, VAT Training is the answer. For any kind of VAT assistance, Adam Global is the place for you. From VAT registration services in UAE, VAT deregistration services in UAE, VAT reconsideration services in UAE, VAT return filing services in UAE and VAT refund claiming services in UAE to VAT training services in UAE , Adam Global offers impeccable advisory and support in all aspects of VAT. To learn more about how we can help your business stay VAT-compliant consult with us for free.
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