The Value Added Tax (VAT) was first introduced in 2018. It resulted in a business shift in UAE because UAE businesses were used to being free from tax obligations. The introduction of VAT resulted in improved compliance in the UAE business world. Companies without VAT compliance have to face huge penalties.
Understanding VAT regulations
Currently, the VAT rate is fixed at 5%. If your business imports/supplies exceed ATD 375,000 annual turnover, you must register for VAT. Businesses can also register for VAT voluntarily with a minimal threshold of AED 187,500. VAT registered companies have to change their business operations in three ways:
• Charge VAT on taxable services/goods supplied
• Reclaim VAT already paid on business services/goods
• Report VAT regularly
Businesses offering certain financial services, dealing with residential properties, bare land, and local passenger transport are exempt from VAT. VAT is charged at 0% for businesses exporting services/goods outside GCC. Certain education and healthcare services are also exempted from VAT. You have to consult with an upright VAT services provider to understand the VAT implications for your business. Your business may be eligible to receive a VAT refund from the government if you have paid tax to the suppliers. It would be best to have professional assistance for a VAT refund because you have to log in to the FTA service portal to apply for a VAT refund.
Importance of VAT records and documentation
When your business deals with huge volumes of goods/suppliers, keeping track of VAT paid and charged is crucial to maintaining accurate financial statements. According to Executive Regulation on Tax Procedures, your business must maintain precise tax records for five years. This includes information on imports and supplies of services and goods. Credit notes, tax invoices, and other associated documents must be recorded properly. Detailed statements of exported goods and services must also be maintained. Any corrections or adjustments made regarding tax invoices and accounts must also be maintained. Your VAT services UAE partner can help you with record maintenance.
The FTA requires quarterly tax return submission by UAE businesses. The period can be shortened or extended according to the discretion of the FTA. The firm providing VIP service in Dubai will update you on tax returns filing requirements. To ensure compliance, tax returns must be submitted before the stipulated date. Any payable VAT taxes must be paid on or before the tax return date. Delayed VAT payments may result in stringent action from the government.
Your business needs VAT services Dubai for VAT registration and record maintenance. Due to the enormous success of VAT implementation, the UAE government will continue to increase the requirements to ensure compliance shortly.