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.
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:
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:
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.
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:
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.
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.