VAT and Tax in general is a deep dark hole that many business struggle to find their way around.
Since Vat was introduced in the UAE in 2018, multitudes of organisations rushed to become VAT compliant, and 3 years later, this task has not gotten any easier, with many organisations having incurred penalties for VAT filling errors.
For many SME’s or starts-ups, filling Vat returns on your own can become a costly exercise that ends up giving you more headaches than anything else.
To help debug, some of these mistakes, we have compiled our top 6 VAT errors you can avoid:
1. Enter your sales in the right emirates
Standard rate sales have to be based on the location of your business or fixed establishment. In other words, this is where you conduct business and majority of your staff & technology resources are available. It is not where your customer is located or does business.
2. Filling VAT returns LATE
VAT returns should be filed on time according to the deadlines set by the FTA: monthly or quarterly. Keeping on top of these deadlines will ensure your tax returns are filed ahead of time and you avoid the hefty penalties. To busy to do this on your own? Send us an email on firstname.lastname@example.org – it’s more cost efficient than paying penalties.
3. Failure to maintain records
According to UAE law, it is mandatory for entities to maintain proper records of every transaction for a minimum of 5 years for most firms and for 15 years for real estate. Types of records: purchases, sales, payments, receipts, import & export records and anything else related to expenditures. Our CRESCO Accounting portal, make it easy for you to upload all your documents in a safe environment accessibly only by you.
4. Incorrect Tax Point or time of supply
In tax terms this is the date that transactions take place. All transactions that fall within the specific tax point should be included in the VAT return for the related tax period. A common error is when supplies take place at the end of the tax quarter and are included in the incorrect return.
5. Issues with Reverse Change Mechanism Transactions
When an entity imports goods & services to the UAE reverse charges are applicable. Entities often forget to link their Tax number with the customs code and can result in various issues when claiming input VAT. If the entities Tax number is linked to their customs code and it reflects in the account of the taxable person then it becomes significantly easier to account for VAT. This can be tricky to execute on your own and it is advised to approach experts in the industry.
6. Excluding zero rated & exempt sales
Many companies file output & input VAT but fail to record zero rates & exempt sales. Even though these transactions have no VAT impact they still need to be accounted for in your return submission.
Looking for an easier way to avoid VAT mistakes?
CRESCO Accounting has been assisting hundreds of businesses in the UAE stay on the right side of the law by submitting their returns on time. Our accountants & tax consultants can assist you with VAT registration, reregistration and identify your VAT requirements so that your business remains complaint – send us an mail to book a consult – email@example.com