VAT Audit
Friday, 15 December 2023 / Published in VAT

Are you Prepared for the VAT Audit? Tips for a Stress-Free Compliance

All transactions must be recorded with complete information, including TRN, invoice number, customs declarations, revenue and expense figures, along with the corresponding VAT amounts.

VAT Audit

Several entities mistakenly consolidate various transactions and document them as a single line item.

Since January 2018, there has been constant talk about the eventual occurrence of VAT audits. However, following the introduction of Corporate Tax in January 2022, attention swiftly shifted from VAT to Corporate Tax. Various CFOs/Tax Heads overlooked certain amendments in the VAT Law in December 2022, granting the Federal Tax Authority the authority to audit a taxpayer for an extended period of four years if the audit notice is issued before the conclusion of the fifth year.

As a result of the extension of the limitation window, many taxpayers are receiving VAT audit notices.

Depending on the complexities, revenue, size, and industry, taxpayers are being issued one of three types of notices:

  1. Covering all tax periods from January 2018 to December 2020
  2. Covering all tax periods from January 2018 to December 2018
  3. Encompassing a sample tax period between January 2018 and December 2020

The audit notification includes a questionnaire that covers fundamental details such as accounting system information, tax advisor details, supplies provided on a free-of-charge basis, bad debts, etc.

Additionally, a transaction data template is provided to capture comprehensive line item details related to supplies (both local and exports), procurements (both local and imports), out-of-scope supplies, etc.

All transactions must be recorded with complete information, including TRN, invoice number, customs declarations, revenue and expense figures, along with the corresponding VAT amounts.

Many entities commonly make the error of consolidating multiple transactions into a single line item, particularly with petty cash expenses. This recording method is incorrect from a VAT perspective.

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VAT ledgers

Alongside detailed transaction-wise information, submissions must include financials, trial balance reconciliations, group structures, and revenue listings. Another common mistake involves preparing a reconciliation solely for the VAT ledgers. In addition to the ledgers, details of the revenue declared in the financials must be provided.

The purpose is to assess whether the revenues recorded in the VAT return align with those in the financial records.

If discrepancies arise, reconciliations are necessary, involving the segregation of accrued revenue, out-of-scope income, etc., from the amounts disclosed in the VAT return. This substantial task is required for each tax period, ultimately aligning with the audited financials.

In the case of VAT-grouped TRN, this activity must be extended for each taxable entity. The accurate reporting of revenue not only affects the output tax liability but also influences the input tax apportionment for each tax period.

It’s worth noting that, in addition to requesting general information, the FTA is seeking industry-specific details. For instance, a taxpayer involved in real estate is asked to provide beneficial ownership details of infrastructure projects, a list of owned land, ongoing development projects, and details on off-plan units sold.

This information aids the tax auditor in analyzing transactions and the associated tax treatments.

For example, a situation might arise where one entity owns the land, while another entity is responsible for constructing infrastructure on that land. The second entity may be recovering input VAT on construction expenses, leading to complexities such as deemed supply from one entity to another or determining ownership of the infrastructure.

Corresponding Tax Implications

Another consideration is whether the initial supply occurred within three years of the completion date, introducing corresponding tax implications.

The concept of the completion date itself is a separate topic for discussion. Lastly, debates persist over scenarios in which entities operate as disclosed or undisclosed agents. All these situations result in varied tax treatments with retrospective implications.

The FTA has consistently encouraged taxpayers to rectify past errors and ensure tax compliance. It has released over 100 public documents to offer guidance on various tax issues and aid taxpayers.

However, during a review, certain scenarios may arise that necessitate additional clarification. In such instances, taxpayers should prepare a position paper to request private clarification from the FTA.

This serves as another avenue for taxpayers to seek the FTA’s insights on a specific transaction. On average, the process of obtaining private clarification may take approximately 1-2 months in total, so it’s important to consider this timeframe when preparing for it.

The penalties for Voluntary Disclosures underwent a significant reduction (from approximately 300% to about 50%), contingent upon the year in which the error occurred.

Nevertheless, if the correction is made after the issuance of the audit notice, a higher penalty (up to 200%) might be enforced. The aim is to emphasize that taxpayers should prioritize careful attention to tax compliance and governance, rectifying any errors promptly. In cases of delay, the advantage of reduced penalties may not be applicable.

All the details specified in the notice need to be supplied within a span of 10 working days. Given the significant risk of penalties and the restricted timeframe for data submission, it is crucial for taxpayers to promptly evaluate their preparedness.

This involves identifying potential risks, rectifying previous mistakes, emphasizing thorough documentation and data management, and ultimately ensuring readiness for the VAT audit.

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

VAT Changes 2023
Tuesday, 07 November 2023 / Published in VAT

VAT UAE: What You Must Know About the VAT Changes

Businesses should reevaluate whether they are required to obtain VAT registration. January 1, 2023, marks a significant milestone for the UAE’s Value-Added Tax (VAT) system, as it signifies five years since its introduction and introduces the first major amendments.

VAT Changes 2023

Before January 1, 2023, business owners must carefully assess the potential consequences of the forthcoming alterations.

Businesses should reevaluate whether they are required to obtain VAT registration. January 1, 2023, marks a significant milestone for the UAE’s Value-Added Tax (VAT) system, as it signifies five years since its introduction and introduces the first major amendments.

Here are the top changes you should know about:

1. Increase Time for Tax Audits

In general, a tax audit for a monthly or quarterly tax period cannot be conducted after five years from the end of that specific tax period. However, if a taxpayer has received notification of a tax audit within the initial five-year period, the audit can still take place and be completed within the subsequent four years following the notification.

2. Tax Audits Following Voluntary Disclosures

If a Voluntary Disclosure for a monthly or quarterly tax period is submitted in the fifth year from that period, the Federal Tax Authority (FTA) will have an additional year to conduct a tax audit. This additional time allows the FTA to process the voluntary disclosure and carry out any necessary audits based on the information provided in the disclosure.

3. Tax Evasion

In cases of tax evasion, a tax audit can be conducted up to 15 years from the end of the tax period in which the evasion took place. Tax evasion is defined as the unlawful actions, whether by a registered or unregistered individual, that result in reduced tax amounts, non-payment of taxes, or obtaining an illegitimate tax refund.

4. Failure VAT registration

It’s a common misconception that avoiding VAT registration keeps businesses off the tax authorities’ radar. However, if a person fails to obtain VAT registration, the Federal Tax Authority (FTA) may initiate a tax audit within 15 years from the date they should have been registered. Therefore, businesses should reevaluate their obligation to obtain VAT registration.

5. Good News for Exporters

If a business’s entire supply is zero-rated, there is no mandatory requirement for business owners to comply with periodic VAT regulations. Such businesses have the option to request an exemption from VAT registration.

For companies that were unaware of this advantageous provision and were already VAT registered, they were obligated to continue their periodic VAT compliance. Effective from January 1, 2023, VAT-registered businesses can also apply for an exemption from VAT registration.

6. Additional requirements for input credit on service imports

Many businesses pay for services from overseas service providers based on agreements without insisting on the issuance of invoices by the service providers. The recent changes in VAT laws specify that, for the import of services, input credit can only be claimed if the taxpayer receives and retains invoices by the VAT laws.

7. Retention Payments in the Construction Industry

In a previous Tax Conversation on 05/07/2021, we discussed the time of supply for retention payments in the construction sector. If the duration between the progressive milestones of goods or services delivery and retention payment claims extends beyond 12 months, VAT may still be applicable. The one-year mark from the date when the goods or services were provided is now designated as a specific VAT supply date.

8. Supplies to Related Parties Considered

Previously, deemed supplies, such as providing goods or services to related parties free of cost, could trigger a VAT liability under existing laws. With the amended VAT laws, a company may not incur a VAT liability for providing free-of-cost goods or services to related parties if the recipient company is otherwise eligible to recover 100% input credit on its purchases.

Concluding Remarks

Tax law amendments are a global trend, reflecting the adaptability of tax laws to evolving economies and the responsiveness of tax authorities to taxpayer needs. In light of the modifications in VAT laws, it’s anticipated that corresponding adjustments to the executive regulations will follow shortly.

Business owners are encouraged to carefully assess the implications of these recent changes, as they are set to take effect on January 1, 2023.

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

UAE electronics and smartphone traders will no longer charge VAT
Friday, 03 November 2023 / Published in VAT

UAE Drops VAT for Bulk Electronics and Smartphone Buyers!

In the future, buyers will instead provide a written declaration to the seller, so UAE electronics and smartphone traders will no longer charge VAT on bulk sales.

UAE electronics and smartphone traders will no longer charge VAT

Traders and wholesalers in the UAE dealing with electronics, mobile phones, computers, and accessories will receive much-needed relief from their VAT obligations. This relief specifically applies to business-to-business (B2B) transactions among VAT-registered dealers, with no changes affecting VAT on consumer purchases of electronic goods.

Under the new regulations, sellers of these products will no longer be required to impose VAT on their supplies to VAT-registered buyers who plan to resell the goods. Instead, going forward, buyers will provide a written declaration to the seller and independently account for VAT on their purchases. This process is known as the ‘Reverse Charge Mechanism’ and is already in place for bulk gold trade between VAT-registered dealers in the UAE.

Extending this decision to encompass electronics and computer products is a significant development for the electronics and computer trade sector in the UAE. It solidifies the UAE’s position as a prominent re-export hub for this market, providing a notable boost to the industry.

Previously, many overseas bulk buyers would purchase electronic goods from various individual suppliers in the UAE, and these goods were later combined for export.

There were instances where customers couldn’t provide export documents to each supplier, potentially making VAT a cost for the local seller.

With the new system in place, electronics goods bought in bulk in the UAE can now be sold to a single VAT-registered consolidator or shipping company using the Reverse Charge Mechanism. The shipping company can then export the goods to the overseas customer in a single shipment, complete with the necessary documents. This change is expected to significantly reduce operating costs for mainland suppliers.

What 'reverse charge' means for small businesses

In simplified terms, these changes will make it easier for electronics businesses in the UAE to comply with tax regulations, according to a prominent industry source.

The tax authority is shifting from collecting VAT at multiple points to a single collection point. This simplifies the tax collection process, rectifies any system gaps, and reduces the potential for lost revenue.

Furthermore, Electronics businesses will now have access to funds tied up in VAT, which they can use to expand their operations. The Reverse Charge Mechanism shifts the responsibility for VAT payments to a different party.

These new regulations reaffirm the authorities’ commitment to transforming Dubai and the UAE into a center for technological innovation and trade. We are excited to witness the industry’s growth under this updated tax framework.

The timing of this change couldn’t be better for the local electronics and tech sector. As we enter the final quarter of 2023, it’s the time when bulk deals become commonplace, with overseas buyers placing orders with UAE suppliers for everything from the Apple iPhone 15 to trending gaming devices.

The new requirements simplify the entire process, particularly in terms of accounting for VAT on such deals. They also reaffirm the UAE’s reputation as the go-to place for purchasing gadgets.

To maintain competitiveness as a trading hub, it’s crucial that the UAE remains affordable and offers easy trading opportunities.

This announcement regarding the Reverse Charge Mechanism is a clear indication that the feedback and insights from the business community and industry groups were heard. As a Board Member of the Dubai Computer Group, which represents the interests of IT traders in Dubai, we’ve been actively providing feedback through official channels to streamline processes and ensure that the UAE retains its competitive edge as a re-exporter.

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

How will VAT be applied to staggered payments for a lease contract?
Thursday, 02 November 2023 / Published in VAT

What are The VAT Rules in the UAE For multi-year Leasing Contracts?

If you make payments in installments for your lease, you might need to be aware of a specific period when VAT applies.

How will VAT be applied to staggered payments for a lease contract?

How will VAT be applied to staggered payments for a lease contract?

When a seemingly innocent question sparks lengthy discussions about taxes, it highlights the intriguing nature of taxation and one’s fascination with the subject.

The initial question appeared simple: What are the VAT consequences of a 4-year equipment lease with eight semi-annual invoices? In the business world, this question encompasses a wide range of transactions.

Whether you’re leasing goods, vehicles, commercial real estate, or intellectual property rights, the VAT implications are crucial for lessors to consider. It’s commonly assumed that VAT will be payable in installments upon the issuance of each of the eight semi-annual invoices.

VAT is calculated based on the ‘date of supply’ for goods or services. The ‘date of supply’ for contracts involving periodic payments or consecutive invoices is clearly defined as the earliest of:

1. The date of issuing a tax invoice.
2. The payment due date as stated on the tax invoice.
3. The date of payment receipt.
4. The date of one year’s expiration from when the goods or services were provided.

If a tax invoice is issued or payment is received, VAT is due only on the amount mentioned in the invoice or the payment. The remaining VAT will be payable later, following VAT laws.

The real challenge arises for long-term contracts when one year has elapsed. Does VAT become immediately payable on the entire remaining value?

Let’s delve into a case study:

Consider a four-year commercial property lease for Dh2 million with advance invoices of Dh250,000 issued every six months. The first two tax invoices, issued before one year from the contract date, should trigger VAT on the first Dh500,000.

For the remaining amount, the one-year threshold will pass before the issuance of subsequent invoices or payments. This raises the question of whether VAT becomes immediately payable on the remaining Dh1.5 million upon completing one year.

The ‘date of supply’ provisions don’t account for apportioning the contract value over the contract period or calculating a proportionate value at the one-year mark. Without such apportionment, the ‘date of supply’ could apply to the entire remaining value once the one-year period expires.

Nature of leasing transactions:

It could be argued that leasing services involve the daily transfer of the right to use the property throughout the contract period, meaning the one-year period never expires.

In leasing transactions, the service essentially revolves around transferring the right to use the property. This transfer happens at a specific point in time, not over a duration. While the right to use the property may span a period, the transfer itself occurs once upon signing the contract.

Concerning extended car leases, it’s clarified that the ‘date of supply’ will be the earliest of the three specified dates, provided it doesn’t exceed one year from the start of the lease.

Hence, leasing services should be considered ‘provided’ at the beginning of the leasing period. At the one-year mark, without apportionment, the ‘date of supply’ for the entire remaining value could be triggered, resulting in a substantial VAT liability.

International Jurisprudence:

Instances of annual tax points in cases of continuous supplies can be found in the VAT/GST laws of the UK and India.

In the UK, the annual tax point applies only to taxable supplies between related parties when the recipient can’t fully recover the input VAT. Since related parties with incomplete input VAT recovery exist, the VAT accounting could be indefinitely delayed without issuing VAT invoices or exchanging lease payments. The creation of an annual tax point prevents this indefinite delay and requires apportioning the contract value over the contract period.

The current UAE VAT provisions don’t address such specific scenarios, which means they could apply to all instances of continuous services.

Corporate Tax:

VAT implications could also impact corporate tax. Recovering input VAT on the entire remaining value might necessitate recognizing deferred tax assets/liabilities in the financial records.

Taxation is about seeking the right answers. It demands asking the right questions, whether consciously or innocently, and being willing to challenge mere hearsay about potential tax consequences.

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

UAE Tax B2B
Thursday, 02 November 2023 / Published in VAT

The Big VAT Shift: Electronics Wholesalers in UAE Brace for New B2B Rules

Starting October 30, 2023, the UAE electronics sector shifted to the ‘Reverse Charge Mechanism‘ for VAT on B2B supplies of electronics and tech devices meant for resale or further manufacturing. The UAE has also issued specific criteria for classifying electronic device components, which are eligible for the Reverse Charge Mechanism.

UAE Tax B2B

Key Points:

  • UAE electronics industry adopted the ‘Reverse Charge Mechanism’ for VAT on B2B supplies of electronics.
  • Eligible components for the Reverse Charge Mechanism include those used in manufacturing, necessary for device operation, or replacements.
  • Components enhancing device functionality but not essential for operation are not covered.
  • SIM cards and similar external cards are exempt.
  • Failure to declare intent of use can lead to unrecoverable VAT for buyers.
  • Correct classification is crucial to avoid VAT-related risks.
  • Transitional provisions apply to supplies dated October 30, 2023, or later.
  • Compliance with date of supply rules, declarations, and TRN verification is necessary.
  • Industry and business owners should ask the right questions to ensure compliance.

The UAE electronics sector transitioned to the ‘Reverse Charge Mechanism’ for VAT on B2B deals involving devices intended for resale or further manufacture on October 30, 2023. A ministerial decision outlined the criteria for eligible electronic device parts, including those used for manufacturing, operation, or replacement. However, components that enhance device functionality but aren’t necessary for operation aren’t covered. SIM cards and similar items are also excluded.

The Reverse Charge Mechanism for B2B supplies is mandatory, and failing to declare intent of use may render input VAT non-recoverable. VAT-registered buyers aiming to resell/manufacture must ensure VAT isn’t charged on electronic device supplies. Proper classification is crucial, as misclassifying items can lead to VAT credit loss or penalties for suppliers.

Certain items like earphones, external storage devices, and protective covers enhance device enjoyment but won’t qualify as parts and pieces. Memory cards, monitors, and motherboards, necessary for device operation, likely will qualify. Other items require careful assessment.

All electronic device supplies after October 30, 2023, must adhere to VAT treatment and compliance requirements, including transitional provisions for advance payments and written declarations. Businesses must evaluate various tax aspects and ensure they ask the right questions regarding this change.

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

Can I Claim VAT On Old Invoices in UAE
Wednesday, 27 September 2023 / Published in VAT
Can I Claim VAT On Old Invoices in UAE

UAE VAT: Can I Claim VAT On Old Invoices in UAE

Input tax, i.e. VAT paid on the purchase of goods and services is claimable in the tax return by set off against the output VAT collected on sales invoices. 

In the normal course, input tax should be recovered in the first tax period in which the following two conditions are satisfied:

  • the tax invoice is received; and
  • either the tax invoice has been paid in the period or the taxable person has decided to settle the invoice in a subsequent tax period – usually within six months after the agreed credit period.

Intention to settle the tax invoice:

Where the invoice has not already been settled within the tax period, it is pertinent to consider whether the taxable person has already decided to settle the invoice.

In this regard, merely receiving an invoice is not considered evidence of intention to settle.

However, if the tax invoice has been duly processed through the normal verification and approvals process of the taxable person and has been recorded in their accounting system, this is likely to be seen as a decision or intention to settle the invoice in due course.

It is important, however, to note that where an invoice has been received by the taxpayer, but has not been verified through the relevant processes to determine its validity and suitability for payment, it may not be possible to argue that the taxpayer has formed the intention to settle the invoice.

In such a case, the taxpayer should consider whether the input tax claim should be deferred to a later tax period.

In the case where a taxable person has received a tax invoice but has not yet decided regarding the settlement of the invoice, the Federal Tax Authority (“FTA”) may argue that the two conditions noted above – receipt of the invoice and the settlement of the invoice or the decision to settle – have not been satisfied.

In this case, therefore, it would not be appropriate to claim the input tax on such an invoice.

In such cases, therefore, the input tax claim invoice should be made in such later tax period when the decision to settle has been taken.

UAE VAT: Can I Claim VAT On Old Invoices in UAE?

Article 55 (2) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax specifically provides that where input VAT on a tax invoice has not been claimed during a tax period notwithstanding that the taxable person was entitled to make such a claim, the taxable person may claim the tax in the subsequent period.  

Situations may arise where input tax has not been claimed in the tax period when the taxable person was entitled to claim nor in the subsequent period, as provided in Article 55 (2).

In such circumstances, the FTA has clarified that the unclaimed input VAT may be claimed through a Voluntary Disclosure.

Voluntary Disclosure:

A voluntary disclosure is a process where the taxpayer notifies the FTA of an error or omission in a VAT return.

A voluntary disclosure for claiming input VAT would be made by amending the input tax previously reported in the VAT return of one of the two tax periods during which the taxpayer could have claimed the input VAT.

Voluntary disclosures is normally required to be made within 20 business days of the taxpayer becoming aware of the error or omission.

However, the FTA may accept late voluntary disclosures if the taxpayer is able to justify the delay by presenting an acceptable reason for the delay.

Do you need help with registering your business for VAT and getting the tax certificate?

Contact us to schedule a free consultation to learn how we can help you to register for VAT and ensure compliance with the VAT rules and regulations.

Claim for periods before Tax Registration? 

Contact us to request a free initial consultation today!

A taxpayer that is newly registered for VAT can claim back VAT paid on goods and services purchased prior to its VAT registration, provided that the goods and services for which input VAT is being claimed were used to make supplies that would ordinarily give the right to input tax recovery.

However, input tax may not be recovered in the following cases:  

  1. The goods and services for which input tax is being claimed, were not used for making taxable supplies.
  2. The input tax pertained to capital assets that were depreciated before the tax registration.
  3. In case of services which were received more than five years prior to the tax registration.
  4. where the goods were moved to another country.

Looking For Best VAT Consulting Service in Dubai?

UAE VAT Implementation Services: What We Offer

Do you think that managing VAT obligations is too challenging for your business?

Beaufort Associates provides VAT Implementation Services in the UAE. Our financial consultants are fully qualified and trained to assist you and guide you on the Do’s and Don’ts of the UAE VAT regime.

We offer professional VAT compliance support and advice tailored to your business needs. Our team can help you to comply with the VAT taxation rules and regulations.

Here is what we can do for you:

  • Help you to register with the FTA;
  • Advise you on your reporting deadlines;
  • Provide guidelines to avoid fines and penalties;
  • Provide you with accounting support to ensure proper recording of VAT;
  • Work with you to prepare your VAT tax returns;
  • Arrange to file the VAT tax return with the tax authorities:
  • Assist in filing for a Voluntary Disclosure:
  • Assist in claiming a refund due to you
  • Assist in claiming VAT refund for new residences for UAE Nationals.

We can also assist with corporate tax consulting, accounting and bookkeeping, audit and a host of other services.

If you need help with any of the above services, for your business in the UAE, feel free to contact us today and request a free initial consultation. We would be glad to assist you.

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

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    vat return UAE
    Sunday, 17 September 2023 / Published in VAT
    vat return UAE

    VAT Return in UAE: Questions Answered

    Do you have questions about VAT return in UAE? In this article, you’ll find all the essential information about the VAT return process in the UAE.

    What Is VAT Return?

    At the end of each tax period, a tax registered person must submit a VAT return to the FTA. It is a report that summarises the value of the supplies and purchases a taxable person has made during the tax period and shows the taxable person’s VAT liability.

    A tax return is a written statement that is submitted periodically. It states the details and calculations of tax liability or refund that are to be paid to or received from tax authorities.

    If the output tax exceeds the input tax amount, you must pay the difference to the FTA. And if the amount of input tax exceeds the amount of output tax, a taxable person will have excess recoverable input tax. Then that person will be able to set it off against subsequent payments due to the FTA or get a refund from the FTA.

    VAT Return Filing

    So how can you file a VAT return? VAT return filing must be done online through the FTA portal: eservices.tax.gov.ae. But before you file the VAT return form on the portal, you should make sure you have met all the tax return requirements.

    Taxable businesses must file VAT returns with FTA on a regular basis. Usually, they must do it within 28 days of the end of the tax period defined for each type of business. A tax period is a specific time for which the payable tax must be calculated and paid. It differs for businesses of different sizes.

    • If a business has an annual turnover below AED150 million, the standard tax period is every quarter.
    • If a business has an annual turnover of AED150 million or more, the standard tax period is every month.

    If you fail to file a tax return within the specified time frame, that will make you liable for fines as per the provisions of Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

    UAE VAT Return Format

    The details and data that must be included in the VAT return for the purpose of tax are specified in the UAE VAT executive regulations. All the details that are required for VAT Return must be prepared in accordance with the UAE VAT Return format issued by the authority.

    The VAT return form is at a summary level or a consolidated level. The registered person has to enter the following consolidated details of total supplies:

    • both purchases and sales
    • output VAT collected on supplies
    • eligible input VAT paid on purchases
    • the total tax due.

    The form also includes details about the name, address, and tax registration number (TRN) of the registrant as well as the VAT Return period and the due date of submission and the tax period. These details are applicable to all VAT registrants and are pre-populated in the online form. In addition to the above-mentioned information, the return format also consists of other additional details:

    • Supplies subject to reverse charge provisions
    • Zero rated supplies
    • Exempt supplies
    • Goods imported into the UAE
    • Profit Margin Scheme applicability
    • Tax Refunds for Tourists Scheme

    The registrant may save the online form as a draft and when all the required information has been satisfactorily entered, they may submit the form by clicking the “Submit” button.

    How to Submit VAT Return in UAE

    As we have already mentioned, VAT returns must be filed electronically through the FTA portal. A taxable person can submit the form themselves or delegate this right to another person who will do it on the taxable person’s behalf. That can be a tax agent or a authorized representative.

    So how to submit a VAT return in UAE? To access the VAT return form, you should login to the e-Services portal using your registered username and password. Then you will need to navigate to the option to open your VAT return and fill in all the required details. When you finish, you have to click Submit. After submitting the return, you will receive an e-mail from the FTA confirming the submission of the VAT return form. Finally, you have to pay the due tax.

    Dealing with VAT is a tedious, complex, and a rather time-consuming process. And you should remember that taxable businesses should keep their books in a well-organized manner to avoid penalties.

    If you find VAT return too challenging, you may need professional guidance.

    Contact us to schedule a free consultation to discuss how we can help you to establish a VAT-compliant accounting system.

    VAT Return in UAE: Learn How We Can Help You

    Beaufort Associates can help you to manage VAT obligations for your business in UAE. You can rely on our team during every stage of the VAT return process. We can advise you on your reporting deadlines to ensure you can avoid fines and penalties. Our highly-qualified and experienced consultants will work with you to prepare your VAT tax returns and arrange the VAT return filing with FTA on time. If you need professional guidance and support with managing the VAT aspects of your business in UAE, please contact us any time.

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    The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

    vat certificate
    Sunday, 10 September 2023 / Published in VAT
    vat certificate

    VAT Certificate in the UAE: A Comprehensive Guide [2024]

    VAT Certificate is a crucial document for businesses engaged in taxable activities. Issued by the Federal Tax Authority (FTA), this certificate validates a company’s registration for Value Added Tax (VAT). It serves as proof that the business is compliant with VAT regulations and authorized to collect and remit taxes. Displaying the VAT Certificate is mandatory, enhancing transparency in commercial transactions. Timely application and adherence to regulatory requirements are essential to obtain and maintain this certificate, avoiding penalties.

    As a VAT consultant, we emphasize its significance for businesses, ensuring seamless compliance and fostering trust in the UAE’s dynamic economic landscape.

    What is the VAT Certificate in UAE?

    VAT registration is a mandatory step towards obtaining a VAT certificate for companies and individuals doing business in the UAE.

    The VAT Certificate UAE is a document that serves as an official confirmation that a business entity is registered under the VAT law for tax collection at every step of product development.

    This certificate is the final step in the VAT registration process. The document is issued by the Federal Tax Authority and carries a unique number referred to as Tax Registration Number, often referred to as (TRN), that is evidence of the entity having been already registered for VAT.

    You receive it once your VAT registration is completed successfully.

    The VAT certificate contains the following important information:

    • Name, registered address and telephone number of VAT registrant
    • TRN number
    • Effective registration date
    • First VAT return period and VAT return due date
    • Start and end dates of tax periods

    VAT Registration Certificate: How to Apply

    In the UAE, businesses whose annual turnover exceeds the mandatory registration threshold of AED 375,000 and the voluntary registration threshold of AED 187,500 are allowed to apply for VAT registration.

    How To Get VAT Certificate From (FTA) Portal

    You can do it only online on the FTA portal and after you complete the required registration information, you can apply for the VAT Registration Certificate.

    Here is how you can do that.

    First, you have to create an e-Service account with FTA. You need to sign up, providing your e-mail details, and create a user name and password.

    To apply for VAT registration, you need to login into your e-Service account using your login credentials and click on the Register for VAT button to start the registration process.

    You should read the VAT Getting Started Guide to get a better idea of certain important requirements and the information you should have to provide.

    You have to follow certain steps – you need to complete the registration form that contains eight sections, such as:

    • About the applicant
    • Details of the business/entity to be registered
    • Contact details
    • Banking details
    • Business relationships (optional)
    • About the VAT registration
    • Declaration
    • Review & submit

    You can track your progress as you fill out the form. You need to fill all the section of online form. Keep in mind that you can move to the next sections only when you fill out all the mandatory fields of the current section.

    All of them are marked with a red asterisk (*) if one or some of the mandatory fields are not filled out.

    The portal is designed to alert you with a pop-up message indicating the relevant fields where you need to enter your details.

    When you finish completing the registration form, you need to review all the details in all the sections, verify them, and complete the registration process by clicking the Submit for Approval button.

    Remember: you should submit only if you are certain that all of the information is correct.

    How To Register For VAT in UAE

    VAT registration is not obligatory for all businesses operating in the UAE. However, businesses are required to register for VAT in the UAE if their taxable supplies and imports surpass AED 375,000.

    Alternatively, businesses have the option to voluntarily register for VAT if their taxable supplies and imports exceed AED 187,500.

    For VAT purposes, the UAE Federal Tax Authority (FTA) defines taxable supplies as:

    “A supply of goods or services made by a business in the UAE that may be taxed at a rate of either 5% or 0%. Imports are also considered in this context, if a supply of such goods or services would be taxable if made within the UAE.”

    In essence, VAT is collected by businesses from their customers and remitted to the government. VAT-registered businesses can also reclaim any VAT paid to their suppliers from the government.

    Required Documents and Forms for VAT UAE

    It is imperative to compile the following information in a suitable format and integrate it into your online application:

    1. Valid trade license(s)
    2. Passport/Emirates ID of the authorized signatory(s)
    3. Proof of authorization for the authorized signatory(s)
    4. Contact information
    5. Bank letter validating the bank account details of the applicant

    Depending on the registration basis, additional pertinent documents may be required:

    For taxable supplies (applicable to all legal types except Federal and Emirate Government):

    – Audit report (audited or non-audited financial statement)
    – Self-prepared calculation sheet, including details to compute taxable/zero-rated supplies based on financial records
    – Revenue forecast with supporting evidence (e.g., Local Purchase Order or Contract)
    – Monthly turnover declaration for specified periods, signed and stamped by the authorized signatory on the entity’s printed letterhead
    – Supporting financial documents (e.g., invoices/LPOs/contracts/title deed/tenancy contracts)

    For taxable expenses (applicable to all legal types except Federal and Emirate Government):

    – Audit report (audited or non-audited financial statement)
    – Expense budget report

    Additional documents may include:

    – Articles of Association/Partnership Agreement (if applicable)
    – Certificate of Incorporation (if applicable for Legal Person)
    – Documents showing ownership information of the business
    – Customs details (if applicable)
    – Power of Attorney documents (if applicable)
    – Club, charity, or association registration documents and supporting evidence (applicable if you selected “Legal person – Club, Charity, or Association”)
    – A copy of the Decree (applicable if you selected “Legal person – Federal UAE Government Entity” or “Legal person – Emirate UAE Government Entity”)
    – Other relevant documents providing information about your organization, its activities, and size (applicable if you selected “Legal person – Other”)
    – A scanned copy of the Emirates ID and passport of the manager, owner, and senior management
    – A scanned copy of the land/property title deed (applicable if you selected “Legal Person – Incorporate/Legal Person – Club or Association/Legal Person – Charity/Legal Person – Federal UAE Government Entity/Legal person – Emirate UAE Government Entity/Natural Person”)

    How to Download VAT Certificate in UAE

    How to Download VAT Certificate in UAE

    So how to get your certificate? Here is the Updated procedure.

    How to Get a VAT Registration Certificate through EmaraTax?

    To get your VAT Registration certificate if you’ve been a taxpayer before, follow these simple steps:

    1. Log in to the EmaraTax Platform using your Emirates ID, UAE Pass, or your taxpayer account.

    2. Once you’re in the dashboard, you’ll find the VAT registration certificate under the “My Correspondences” section of your Taxable Person account.

    3. Click on the certificate, and then download it in PDF format.

    Important note: If you’ve used the system before and your tax registration certificate wasn’t previously accessible as a PDF in your dashboard, you won’t find it in your EmaraTax dashboard.

    In this situation, to obtain an updated registration certificate, you’ll need to submit a VAT registration amendment application through EmaraTax. This application should include any updated information, such as your trade license, Emirates ID, contact details, and so on. Your registration certificate will be issued once the FTA (Federal Tax Authority) approves your application.

    How to download the VAT return in Emaratax?

    Currently, the FTA permits the download of an acknowledgment exclusively for submitted returns in EmaraTax.

    To accomplish this:

    • Log in to Emaratax.
    • File for VAT Returns, ensuring the inclusion of the necessary documents.
    • Fulfill the payment process.
    • Following the submission of your VAT return, locate the acknowledgment screen.
    • Click and download the acknowledgment screen.

    Furthermore, the FTA will dispatch an email to verify the submission of your refund in EmaraTax.

    Do you need help with registering your business for VAT and getting the tax certificate?

    Contact us to schedule a free consultation to learn how we can help you to register for VAT and ensure compliance with the VAT rules and regulations.

    Learn More about What We Offer

    You can benefit from our comprehensive management consulting and business advisory services in UAE.

    Beaufort Associates has a great team of experienced VAT consultants that can assist our clients in applying for VAT Registration and getting VAT Certificate. We also offer assistance with accounting and bookkeeping.

    Our experts are dedicated to providing you with world-class services tailored to the specific needs of your business.

    We will provide you with professional advice to help you understand the taxation system and ensure that you always remain compliant with VAT laws in UAE. We also offer the necessary accounting and invoicing guidelines under VAT and support for preparing and filing the first VAT return.

    Contact us to request a free initial consultation today!

    Would you like to rate us on Google?

    The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

    how to pay vat in UAE
    Wednesday, 17 March 2021 / Published in VAT
    how to pay vat in UAE

    How to Pay VAT in UAE: Everything You Should Know

    Value Added Tax (VAT) is a general consumption tax introduced in the UAE on 1 January 2018 with a rate of 5%, and it applies to the majority of transactions in goods and services. Are you looking for advice on how to pay VAT in UAE? In this article, you’ll find all the necessary information on how to do it right.

    Besides, businesses may choose to register for VAT voluntarily if the total value of their taxable supplies and imports (or taxable expenses) exceeds the voluntary registration threshold of AED 187,500.

    Here is how it works.

    • UAE imposes VAT on tax registered businesses on a taxable supply of goods or services at each step of the supply chain.
    • Businesses pay the government the tax that they collect from their customers.
    • At the same time, they receive a refund from the government on the tax that they have paid to their suppliers.

    VAT Filing in UAE

    VAT registered businesses must submit a VAT return to Federal Tax Authority (FTA) at the end of each tax period. VAT filing in UAE is done electronically through the FTA portal. The return can be submitted by the taxable person or another person who has the right to do so on the taxable person’s behalf. For example, you can hire a tax agent or an authorized representative to do it for you.

    Taxable businesses must file VAT returns with FTA and pay the tax within 28 days of the end of the tax period as determined by FTA for each business. If that date falls on a public holiday or weekend, it must be submitted on the next working day after the holiday or weekend.

    The standard tax period is:

    • quarterly for businesses with an annual turnover below Dh150 million
    • monthly for businesses with an annual turnover of Dh150 million or more.

    VAT Submission UAE

    The businesses are required to file VAT return online using the Federal Tax Authority (FTA) portal. The FTA Portal is designed to accept the returns only through online mode because offline capabilities to file VAT return through XML and EXCEL are currently not available. That means that taxpayers have to manually provide the values of Sales, Purchase, Output VAT, Input VAT, etc., in the appropriate boxes of the VAT return form available on the FTA portal.

    The VAT Return form is named “VAT 201”. You need to fill it and submit it online. The Form VAT 201 has seven sections:

    • Taxable Person Details
    • VAT Return Period
    • VAT on sales and all other outputs
    • VAT on expenses and all other inputs
    • Net VAT Due
    • Additional reporting requirements
    • Declaration and Authorized Signatory

    Each of these sections consists of different fields where taxpayers have to provide the details to complete the VAT Tax return filing.

    Before submitting the VAT Return, you should take utmost care in verifying all the details. You should click the Submit button only when you are sure that all the information is correct. After the successful filing of the VAT Return, you will receive an e-mail from FTA confirming the VAT Return submission.

    Thinking of outsourcing your tax work to ensure that your VAT is calculated correctly?

    Reach out to learn how we can help you to establish and implement VAT compliant accounting system and processes.

    How to Pay VAT in UAE

    If the output VAT in VAT return is higher than the recoverable input VAT, the difference will result in a VAT liability, and it needs to be paid to the FTA. Registered businesses must pay their due tax to the Federal Tax Authority, using one of the following options:

    • locally issued UAE bank credit card
    • bank transfer
    • e-Dirham card

    When you make VAT payments using your e-Dirham card at the e-Service portal, you will have to pay a transaction fee of AED 3. A payment using a credit card will typically incur a charge between 2% – 3% of the total payable amount.

    It is possible to make partial payments. But you should make sure you pay the entire amount before the due date because there are penalties for late filing of a return or late payment of VAT. Besides, a taxable person may be subject to a penalty if the information submitted in a VAT return is incorrect.

    And remember that although tax returns must be submitted and paid electronically, you must keep accounting records and documents relating to business activities properly. That will allow the FTA to check that you have got everything right.  These business records include such documents as the balance sheet, profit and loss account, payroll records, wages, fixed assets, records and inventory statements.

    Learn How We Can Help in Filing VAT

    Beaufort Associates offers world-class business advisory, management consulting, and VAT consultancy services for businesses in different industries in the UAE. Our experts know all the intricacies of the UAE tax laws and regulations. They can provide you with VAT compliance support and guidance to ensure that your company meets all regulatory requirements.

    We will provide you with accounting advice and work with your team to prepare the VAT return. We will also facilitate the filing of the VAT return with the tax authorities after your approval. Contact us for a free initial consultation if you need reliable help to manage your business’s VAT aspects.

    The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

    vat dubai
    Sunday, 31 January 2021 / Published in VAT
    vat dubai

    VAT in Dubai: How It Works

    A value-added tax or VAT is a general consumption tax on the consumption of goods and services, applied at each stage of the supply chain. It is based on the value added at each stage from production to the point of sale. More than 160 countries around the world use value-added taxation.

    The UAE introduced a value-added tax on January 1, 2018, together with other GCC states in order to diversify their economies and reduce their dependence on oil. In this article, you can find information about the specifics of the VAT in Dubai and the GCC region.

    UAE VAT Law

    The UAE VAT law came into effect on January 1, 2018. It sets out the framework within which value-added tax is levied in the UAE.  

    VAT registered businesses collect the tax on behalf of the UAE government, and consumers bear the VAT in the form of a 5% increase in the cost of taxable goods and services. Businesses are required to be clear about how much VAT a customer has to pay for each transaction.

    VAT-registered businesses must report the amount of value-added tax they have charged and the amount of value-added tax they have paid to the government on a regular basis. The reporting is done online.

    If you have charged more VAT than you have paid, you have to pay the difference to the government. If you have paid more tax than you have charged, you can reclaim the difference.

    Most taxable persons are required to file a quarterly VAT return (3 calendar months), with the quarter ending date as determined by the Federal Tax Authority (FTA). The FTA may exceptionally require the taxable person to file a monthly return. The tax return for a quarterly, monthly or other period as determined by the FTA must be submitted, together with tax due, if any, within 28 days following the end of the tax period. Failing to file a tax return within the specified time frame will lead to fines. It’s crucial to have a trustworthy VAT consultant to avoid any issues.

    VAT in GCC Region

    The UAE coordinates VAT implementation with other GCC countries. All six GCC member states signed the Common VAT Agreement in June 2016. They agreed that each GCC Member State would introduce a VAT system at a rate of 5%.

    Three of the states – the UAE, Kingdom of Saudi Arabia, and Bahrain – have already implemented VAT after signing the VAT GCC Framework. But there has been much debate over the most suitable timing for implementation of VAT in the remaining states.

    Here is what we know at the time of writing.

    • Oman will introduce its new VAT system in April 2021.
    • Qatar is currently expected to implement VAT in the second or third quarter of 2021.
    • Kuwait is expected to implement VAT by 2022.

    Saudi Arabia tripled value-added tax to 15% in July 2020 as a part of measures to support its economy and to shore up state finances, but the Kingdom could review VAT increase after Covid-19 pandemic ends.

    Since the UAE economy is already partly diversified and has non-oil revenues, the government has no plans to raise VAT to more than 5%.

    VAT Threshold in the UAE for Businesses

    Businesses can register for VAT through the eServices section on the FTA website. So what are the criteria for registering?

    The mandatory VAT threshold in the UAE is AED 375,000 per year. Also, if the businesses anticipate that the total value of supplies will exceed the mandatory registration threshold of AED 375,000 in the next 30 days, then they have to register for UAE VAT.

    VAT registration is optional for businesses whose supplies and imports exceed AED 187,500 per year. Non-resident companies or individuals with economic activities in the UAE are also required to register for VAT.

    VAT Implementation in the UAE

    Businesses need to understand their obligations in respect of the registration and compliance issues that are mandatory and take necessary steps for VAT implementation into their operations. It’s also important to stay updated about VAT in UAE latest news. That will allow you to be informed about possible changes in the VAT Implementation in the UAE.

    Businesses must levy VAT on their goods and services at each transactional stage, from raw materials to finished products. According to the regulations, businesses are responsible for carefully documenting their business income, costs, and associated VAT charges.

    That means that you must properly keep business records that will allow the government to check that you have the right documentation. These accounting records and documents relating to business activities include the balance sheet, profit and loss account, payroll records, wages, fixed assets, records, and inventory statements.

    Do you need professional guidance to ensure you are compliant with your VAT obligations?

    Contact us and schedule a free consultation to learn how we can help you to establish and implement VAT compliant accounting system and processes.

    UAE VAT Implementation Services: What We Offer

    Do you think that managing VAT obligations is too challenging for your business? Beaufort Associates provides VAT Implementation Services in the UAE. Our financial consultants are fully qualified and trained to assist you in adopting the necessary changes relevant to GCC’s new tax policy and guide you on the Do’s and Don’ts of the system.

    We offer professional VAT compliance support and advice tailored to your business needs. Our team can help you to comply with the VAT taxation rules and regulations.

    Here is what we can do for you:

    • Help you to register with the FTA;
    • Advise you on your reporting deadlines;
    • Provide guidelines to avoid fines and penalties;
    • Provide you with accounting support to ensure proper recording of VAT;
    • Work with you to prepare the VAT tax returns;
    • Arrange to file the VAT return with the tax authorities.

    If you need help to manage the VAT aspects of your business in the UAE, feel free to contact us today and request a free initial consultation! We would be glad to assist you.

    Would you like to rate us on Google?

    The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.