There are some issues that businesses should not ignore when introducing VAT. We will explain the details to you.

How is VAT charged?

Companies are required to document their income and expenses.

Companies should:

  • Charge the customer with 5% VAT
  • Value added tax is applied to goods and services purchased from suppliers. If necessary, the difference will be paid to the state or claimed back.
  • Companies with a taxable goods and delivery value exceeding AED 375,000 are required to register for VAT. VAT registration is optional for businesses whose taxable goods and shipments are valued less than AED 375,000 but greater than AED 187,500.

When should VAT returns be submitted?

Registered companies must submit regular VAT returns to the FTA within 28 days of the end of the tax period.

You have the option to file sales tax returns online.

Submission of VAT return

VAT refund is submitted online – manual refunds are not possible. It is possible to create an electronic presentation through the portal of the free trade agreement. VAT returns must be filed monthly to quarterly. Delays in submitting feedback can be penalized by tax authorities.

What types of documents should be kept for how long?

It has a duty to keep the books of accounts as per the UAE Tax Code. In addition, the institution provides annual financial statements, direct payables, purchase journal, issued invoices, general ledger, payee invoices, VAT book, etc. may request additional documents.

According to the Value Added Tax Law, business books and records must be kept for five years.

Is it possible to offset customs duties with VAT payments?

VAT is collected at customs paid by the importer. VAT is thus calculated on the price of goods or services, including customs.

Non-compliance with VAT

Non-compliance can result in:

VAT is not registered if you are in the taxable category

Failure to submit a VAT declaration or pay VAT within the specified time

Failure to comply with records required by tax laws

Avoiding VAT

VAT in the UAE was to come into effect on 1 January 2018. Companies with annual sales exceeding AED 150 million are required to register for VAT by the agency before October 31, 2017, and companies with annual sales exceeding AED 10 million are encouraged to register before November 30, 2017 to register.

We have a team of experts to assist you with business establishment, registration and advice in UAE21. If you have any questions about VAT or tax advice for businesses in the UAE, please contact us.