Excerpt Content: Ensure VAT compliance and avoid penalties by filing VAT returns in the UAE. This comprehensive guide takes you through the step-by-step process, ensuring adherence to FTA regulations. Discover VAT liability, registration requirements, VAT collection procedures, and accurate filing techniques.
VAT return filing in UAE is a crucial process that all VAT-registered businesses must comply with. This guide aims to provide a step-by-step explanation of the VAT return filing process, ensuring accuracy and seamless compliance with the Federal Tax Authority (FTA) regulations.
Understanding VAT Return Filing:
VAT return filing is mandatory for businesses registered under UAE VAT. Noncompliance may result in penalties or fines. The turnover threshold determines the scope of VAT registration, with mandatory registration for businesses exceeding AED 375,000 in annual taxable supplies and imports.
Liability of VAT:
The liability of Value Added Tax (VAT) is determined by calculating the difference between the output tax, which is the VAT charged on supplies of goods and services during a specific tax period, and the input tax, which is the VAT incurred on purchases during the same tax period.
If the output tax amount is higher than the input tax, the excess must be paid to the Federal Tax Authority (FTA). However, if the input tax exceeds the output tax, a taxable person can recover the excess input tax and offset it against future payments owed to the FTA.
Registering for VAT:
To register for VAT in the UAE, submit the VAT registration application form along with supporting documents such as a business license and passport copies of directors/shareholders. After approval, you will receive a VAT registration number necessary for the filing of vat return in UAE.
How is VAT collected?
VAT-registered businesses act as intermediaries by collecting VAT on behalf of the government, while consumers bear the cost of VAT as it is reflected in a 5% increase in the prices of taxable goods and services they purchase in the UAE.
In the UAE, VAT is imposed on tax-registered businesses at a rate of 5% for each stage of the supply chain involving taxable goods or services.
Additionally, tourists in the UAE are also subject to paying VAT at the time of purchase.
When are businesses required to file VAT returns?
Taxable businesses are required to submit VAT returns to the Federal Tax Authority (FTA) within a specific timeframe, typically within 28 days after the end of the designated “tax period” defined for each type of business. The tax period refers to a specific duration during which the payable tax is calculated and settled. The standard tax period varies based on the annual turnover of the business:
- In the case of businesses with an annual turnover below AED 150 million, the tax period is divided into quarters.
- The tax period is monthly for enterprises with a yearly turnover of AED 150 million or more.
Filing a VAT Return:
a. Accessing the FTA Portal:
Use your registered username and password to log into the FTA e-Services portal. Navigate to “VAT” > “VAT 201 – VAT Return” > “VAT 201 – New VAT Return” to initiate the filing process.
b. Taxable Person Details:
Enter your Tax Registration Number (TRN), name, and address. For tax agents filing on behalf of taxpayers, include the Tax Agent Approval Number (TAAN) and Tax Agency Number (TAN) along with relevant details.
c. VAT Return Period:
The return period, tax year end, period reference number, and due date are auto-populated. Input tax apportionment annual adjustment applies from the second year.
d. VAT on Sales and Outputs:
Provide details of standard rate taxable supplies, zero-rated supplies, exempt supplies, and supplies subject to the reverse charge mechanism.
e. VAT on Expenses and Inputs:
Furnish details of purchases or expenses subject to a standard rate of 5%, supplies subject to reverse charge, and eligible recoverable input tax.
f. Net VAT Due:
Calculate VAT payable for the period. Box 12 represents the total value of output tax due, while Box 13 indicates recoverable input tax. Box 14 shows the payable tax, which is the difference between output tax and recoverable tax.
g. Additional Reporting Requirements:
If applicable, report the use of the Profit Margin Scheme.
h. Declaration and Authorized Signatory:
Provide authorized signatory details and submit the VAT return form. Saving the form as a draft is also an option.
i. Payment of Vat to FTA
Please keep in mind that the procedure does not finish when you click the submit button on the site; the actual payment of VAT to FTA is the second and last step in completing the Vat Return Submission and Payment procedure. After submission, please navigate to the tab ‘My Payments’, select the appropriate button to indicate where you want to apply for that payment first.
Fill the amount mentioned and click the ‘Make the Payment’ button and choose the appropriate method and pay.
Importance of Accurate Filing:
Review all details before submitting the VAT return to ensure accuracy. After successful filing, you will receive an email confirmation from the FTA.
Penalties for Not Submitting and Paying VAT Returns.
Not filing your VAT return on time
|Not paying your VAT by the due date|
|AED 1000 FOR 1st-time delayAED 2000 – In case of repetitive noncompliance within 24 months||2% at once on the next day after the deadline for payment of any unpaid tax. Thereafter, unpaid tax is charged at a rate of 4% every month till the payment of tax.Any outstanding sum beyond the payment window in the UAE may be subject to a penalty of up to 300% if not paid within one calendar month.|
Eight Common Mistakes While VAT Return Filing in UAE
- Inability to include the reverse charge mechanism in calculations
- Using adjustment columns incorrectly
- Records not consistently updated.
- VAT computation faults
- Lack of planning.
- Neglect zero-rated and exempted sales
- Claiming input credit for costs that have been banned or disallowed
- Misclassification of standard-rated sales as zero-rated and vice versa
- Delayed submission
VAT filing in UAE requires careful consolidation and submission of sales, purchase, output VAT, and input VAT details. Not complying can lead to the imposition of penalties.
Ensure seamless compliance and avoid hefty penalties by seeking professional assistance from reputable tax agents at Easyfiling. Our experienced team can guide you through the VAT return filing process, provide expert advice, and help you maintain accurate records. Contact us today to simplify your VAT obligations and stay on top of your financial responsibilities.
Apart from that, here are some reliable sources and government websites that provide updates on VAT regulations in the UAE: