VAT Return Filing in UAE
Value Added Tax(VAT) was introduced by the UAE government on 1st January 2018. VAT is an indirect tax that is levied on the consumption of goods and services. The imposition of vat would greatly have an impact on the functioning of the business and with increased risk, volume and complexity of the transactions it becomes difficult for the taxpayers to meet the tax compliance.
The Federal Tax Authority (FTA) is the government entity who is responsible for the collection and management of the Taxes. All the legislation including the guides and clarifications are provided by the authority to help the business organizations.
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.
If you want to form a company or do business in UAE, you should be aware of the VAT return filing and VAT related process existing here.
What is VAT Return Filing and VAT Compliance?
VAT return filing states how much VAT is to be paid or reimbursed by the FTA. AT return is done quarterly. 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 Liability?
The taxpayer is responsible for calculating the VAT return during the filing process. It is calculated considering below things-
- Total sales and purchases of your business in the relevant return period
- VAT amount you owe for sales
- VAT amount 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 vice-versa, you can either ask for the refund of excess VAT or can carry forward the excess to next return period.
Who Should File VAT Return?
All registrants are required to file VAT return, irrespective to the type of VAT registration or sales, purchases, output tax, input tax, etc. Registered tax agents in Dubai will file the tax returns on behalf of the taxable persons.
How to File VAT Return in UAE?
Businesses can file their VAT return online using FTA portal. Following details are to be filled in the same-
- 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 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.
Filing Incorrect VAT Return
Incorrect filing of VAT return by the tax registrant is liable for a penalty in the UAE.
- Fixed penalty of AED 3000 for the first time and AED 5000 for the second time
- Percentage based penalty on the amount unpaid to the FTA due to the error
Failure to File UAE VAT Return on Time
A penalty of AED 1,000 will be charged to VAT registrant who fails to file VAT Return on the stipulated time frame. Further, the VAT registrant will be liable to pay a penalty of AED 2,000 in case of repeating the offence within 24 months.
Thus, it becomes crucial 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.
How Can We Help?
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