VAT Return Filing Service in UAE

VAT Return Filing Service in UAE

A tax return is a document through which a tax registrant submits the details of his supplies and purchases to the Federal Tax Authority (FTA) in the UAE.

VAT Return filing in the UAE depends on the tax periods allotted to your business by FTA upon VAT Registration. FTA, during the approval stages of VAT registration, determines the tax periods for registrants which can be monthly or quarterly as the authority may deem fit.

VAT Return Filing in the UAE is completely an online process through which a tax registrant can present the value of their sales and purchases and remit the tax due.

In cases where the supplies are lower than the purchases, a VAT registrant can apply for a tax refund. Application of tax refund is a separate procedure and requires submission of further details as sought by the FTA.

VAT Return Filing in the UAE does not require submission of documents such as tax invoice, tax credit notes at the time of return filing. The registrant is responsible to maintain all the documents related to his business and need to furnish it as and when sought by FTA.

Importance of VAT Return Filing in the UAE

As a tax registrant in UAE, it is the responsibility of a business to report the details of its supplies to the authority. Comparing to the other tax regimes, VAT return filing in the UAE is relatively a simple process provided you understand the law thoroughly.

As it is construed an uncomplicated process, we have seen a lot of businesses taking it lightly and end up paying hefty penalties. Therefore, it is very important that you file your VAT return properly and on time.

Penalties associated with VAT Return filing in the UAE

• If a taxable person fails to file his return on or before the due date, he will incur a non-filing penalty 1,000 for the first time. 2,000 in case of repetition.
• If a taxable person fails to remit his dues on or before the due date, he will incur a non-payment penalty as follows:
  » 2% of the unpaid tax is due immediately.
  » 4% is due on the seventh day following the deadline for payment.
  » 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the due date for payment, up to a maximum of 300%.

These VAT penalties will be automatically computed and charged to your FTA account from the date of default. Such VAT penalties can result in a huge cash outflow to a business which can be avoided if proper attention is given to tax return filing.

Some of the common errors businesses make while VAT Return Filing.

It is very crucial for a business to understand the layout and reasoning for each column in a VAT return. Only by a proper understanding of the law, one can understand the intended use of a particular column in a tax return.

Some of the most common errors we have noted are as follows:

•  Failure to issue a valid tax invoice as per provisions of law
• Non-maintenance of proper records
• Wrong emirate-wise reporting
• Improper adjustment of Bad debts
• Wrong usage of ‘Adjustment’ column in case of imports
• Wrong classification between Exports and Out of Scope supplies
• Incorrect input claims including personal expenses and entertainment expenses
• Improper adjustment of Input taxes in wrong tax periods
• The wrong usage of Refund and VDF Forms
• Non-disclosure of Import of service

The above-mentioned VAT Return Filing errors are only the tip of an iceberg and can result in huge errors in the tax return. A business needs to be extremely careful in assessing its capability to address these issues as it may lead to non-compliance.