Register for VAT
- Not all businesses will need to register for VAT. Only businesses that meet the mandatory AED 375,000 annual turnover requirement will have to register for VAT. Companies with AED 187,500 annual turnover can voluntarily register.
- Also, businesses may not need to register with the government if they only provide goods and services which are not subject to VAT. This is subject to the MoF approval.
- The UAE Federal Tax Authority (FTA) has announced the deadlines for VAT registration in the UAE. This has been summarized below:
— Businesses with a turnover exceeding AED 150m should apply for registration before October 31, 2017.
— Businesses with a turnover exceeding AED 10m should apply for registration before November 30, 2017.
— All other business entities should submit their application before December 04, 2017 so as to minimize the risk of not being registered in time for VAT go-live.
- Late registration fees will be implied to all businesses who fails to comply with the VAT registration deadlines. The Cabinet Resolution. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE mentions a fine of AED20,000.00
- All businesses in the UAE will need to record all their financial transactions and ensure that their financial records are accurate and up to date.
- Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case the FTA need to establish whether they should be registered.
- All businesses must keep records with respect to all trading transactions. They must also meet the specifications set out in due course by the FTA to be eligible as authentic and original invoices to claim VAT against purchases.
To meet FTA requirements, businesses must record:
– VAT compliant Tax invoices for all sales and purchases.
– Invoices must be uniquely numbered
– Debit or credit notes traceable to the original invoice
– Set of import and export records including import & customs documentation
– Records of goods/services provided for free or allocated for private use
– Zero rated or VAT exempt supplies and purchases
To ensure you can recover VAT correctly, more control and documentation will be required to support the input VAT returns. You may also need to maintain some or all of the following: accurate accounts, general ledger, VAT ledger and purchase day book.
Records must be kept for 5 years and available for audit by the FTA.
- The UAE Council of Ministers announced that failure to keep required records and other information specified in the tax laws, business will be fined Dh10,000 the first time and Dh50,000 for a repeat offence.
Submission of Accurate Returns
To assure compliance to FTA requirements, VAT registered businesses
– Must charge the correct VAT on taxable goods or services they supply
– May reclaim any allowable VAT they’ve paid on business related goods or services supported by a compliant invoice and documentation
– Account for Reverse Charge VAT on cross border purchases of goods and services
– Comply to the reporting requirement to calculate and submit VAT returns on Emirate level basis
- A VAT-registered business must report the amount of VAT charged and the amount of VAT you’ve paid to the government on a regular basis. This will be a formal submission and reporting will be made online.
- If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.
- All Businesses that fails to keep the required records and documents will be fined AED10,000 for the first offence and AED50,000 for repeated offence. In addition, a business may be fined for failure to comply with conditions and procedures related to keeping the taxable goods in a designated zone or moving them to another designated zone for AED50,000 or 50% of tax whichever is higher paid on the goods that resulted in the violation.