Mistakes to Avoid When Filing VAT Returns
The United Arab Emirates (UAE) began collecting value-added tax (VAT) on January 1, 2018. The value-added tax, sometimes known as VAT, is a tax that is applied to both goods and services at every stage of the manufacturing and distribution processes. It is a form of indirect taxation, and enterprises are the ones responsible for collecting it on behalf of the government. The United Arab Emirates (UAE) is still getting used to the idea of value-added tax (VAT), thus businesses can make mistakes while file VAT returns. In the following paragraphs, we will go through some of the most typical errors that should be avoided when filing VAT returns in the UAE.
Not Registering for VAT
The failure to register for value-added tax (VAT) is one of the most typical errors made by enterprises. If an organization’s yearly taxable revenue is more than AED 375,000, then that organization is needed to register for VAT. On the other hand, some companies might not register for VAT at all or might register much later than required, which would result in penalties and fines. In addition, companies may register for the improper VAT scheme, which may lead to inaccurate VAT computations.
If a company wants to steer clear of this error, it needs to make sure that it registers for VAT on time and does so under the appropriate VAT scheme. To further ensure that they comply with VAT legislation, it is recommended that they seek the professional assistance of providers of VAT services.
Incorrect VAT Calculations
Accurately calculating and including the appropriate amount of VAT on invoices is a requirement for commercial enterprises. Inaccurate calculations of VAT can lead to either an overpayment or an underpayment of VAT, either which can have negative repercussions for the company’s finances.
The United Arab Emirates has three different VAT registration near-me rates: the regular rate is 5%, and there are also two other rates: zero-rated and exempt. On their invoices, businesses have a responsibility to ensure that they are applying the appropriate VAT rate and that they have accurately calculated the VAT amount.
Businesses that want to steer clear of this error should consult with providers of VAT services to receive expert guidance. These providers can help firms effectively calculate VAT and guarantee that they comply with relevant legislation.
Late Submission of VAT Returns
To avoid incurring penalties and fines, businesses must file their VAT returns on time. VAT returns are required to be submitted quarterly, and the deadline for submitting these returns is 28 days following the close of each Tax period.
If you fail to cheap VAT registration by the due date, you could be subject to a fine of AED 1,000 for the first violation and AED 2,000 for any future crimes. If a company misses their VAT return submission deadline for an extended period, the company may be subject to additional fines.
For businesses to steer clear of making this error, they need to be diligent about submitting their VAT returns on time and monitoring the filing deadlines. Companies could also look for support from suppliers of VAT services, who can help them meet the deadlines for completing their VAT returns and verify that they are in compliance with the legislation governing VAT.
Incorrect VAT Returns
Companies have a responsibility to ensure that the VAT returns they submit are accurate and comprehensive. Improper returns for value-added tax (VAT) can result in penalties and fines, and they can also prompt a VAT examination by the Federal Revenue Authority (FTA).
Businesses in the UAE are obligated to file their VAT returns through the FTA’s online portal. The VAT returns are required to include specifics regarding the organization’s taxable supplies, zero-rated goods, exempt supplies, and input tax payments. The value-added tax that is incurred by a company as a result of its expenditures and purchases is referred to as input tax.
For businesses to steer clear of making this error, they must get assistance from VAT services providers who can guide them through the process of accurately completing and submitting their VAT returns. They should also ensure that they are in compliance with VAT legislation and keep correct records of all of their transactions related to VAT.
Failure to Keep Accurate Records
Invoices, receipts, and credit notes are some of the documents that must be kept as part of an accurate record of a company’s VAT operations. The failure to maintain accurate records can result in penalties and fines, and it may also cause the FTA to conduct a VAT inspection on the business.
Over five years, businesses in the UAE are required to retain records of the VAT transactions related to their operations. These records are required to be preserved in either Arabic or English, and the FTA must be able to easily access them.
To steer clear of this error, businesses should make it a priority to maintain precise records of the VAT transactions they conduct and preserve these data in a location that is both secure and easily accessible. They should also look for help from suppliers of VAT services, who will be able to guide them through the requirements for record-keeping and verify that they are in compliance with the legislation regarding VAT.
In the United Arab Emirates, submitting VAT returns may be a complicated process, and businesses run the risk of making errors that could lead to financial penalties. The failure to register for VAT, doing inaccurate calculations related to VAT, filing VAT returns late, doing so incorrectly, and failing to retain accurate records are all examples of common blunders.
For businesses to avoid making these errors, they must seek the aid of VAT service providers. These providers can guide businesses through the process of complying with VAT requirements and ensure that their VAT returns are accurate and comprehensive.