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.
Here’s a summary of important updates related to VAT in March and June 2023 in the UAE:
March 2023 Update – Voluntary Disclosure of VAT Errors:
Starting from March 1, 2023, businesses are required to voluntarily report any errors in their VAT returns to the Federal Tax Authority (FTA).
Previously, only errors exceeding AED 10,000 (approximately USD 3,750) needed to be disclosed. Now, there is no minimum threshold, and even minor errors must be reported.
Fixed fines of AED 1,000 apply for the initial disclosure and AED 2,000 for subsequent disclosures of such errors. Late payment penalties may also be imposed.
This means that, with the removal of the threshold, the penalty for small errors can sometimes be higher than the actual tax liability.
VAT Input Apportionment Update:
In March, the UAE issued guidance on VAT input apportionment.
This guidance outlines the rules for general input tax apportionment and introduces special methods for specific types of companies where the standard input tax-based apportionment method may not result in a fair and reasonable outcome.
The guide covers:
- General input tax apportionment rules.
- The application process for using a special method of input tax apportionment.
- The necessary information required to complete the application form for a special apportionment method.
June 2023 VAT Update – Tax Clarification:
A Tax Clarification is an official document issued by the FTA in response to a query.
It provides guidance on the tax treatment of specific transactions based on information provided by the applicant, without FTA verification.
Importantly, the clarification only applies to the applicant and the mentioned transaction(s), without setting a precedent for others or different transactions involving the same applicant.
New VAT Rules in UAE (2023)
Businesses in the UAE need to stay informed about the new VAT rules. There have been recent amendments to the UAE VAT decree law, which will be implemented from January 2023.
Here is a summary of the key changes to the VAT Law that will take effect from January 1, 2023:
Here are the important points regarding tax audits and related timelines in the UAE:
1. Extended Time for Tax Audit:
In general, a tax audit for a monthly or quarterly tax period cannot take place after 5 years from the end of that tax period. However, if a taxpayer is notified of a tax audit within those initial 5 years, the audit can be conducted or completed during the subsequent 4 years following the notification.
2. Tax Audit After Voluntary Disclosure:
If a Voluntary Disclosure for a monthly or quarterly tax period is submitted in the 5th year from that tax period, the Federal Tax Authority (FTA) will have an additional 1 year to conduct a tax audit. This extra time allows the FTA to process the voluntary disclosure and carry out additional audits based on the disclosed information.
3. Tax Evasion:
In cases of tax evasion, a tax audit can be conducted within 15 years from the end of the tax period in which the tax evasion occurred. Tax evasion is defined as a person, whether registered or not, using illegal methods to reduce the amount of tax owed, not paying the tax, or obtaining an ineligible tax refund.
4. Failure to Obtain VAT Registration:
Some individuals might think that by not registering for VAT, they can remain unnoticed by tax authorities. However, if a person fails to obtain VAT registration, the Federal Tax Authority (FTA) may conduct a tax audit within 15 years from the date when that person should have been registered.
It’s important for businesses, especially those making zero-rated supplies, to reassess whether they are obligated to obtain VAT registration.
5. Good News for 100% Exporters:
If a business exclusively engages in zero-rated supplies (100% zero-rated), they are not required to comply with periodic VAT filings. These businesses have the option to request an exception from VAT registration. As of January 1, 2023, even VAT-registered businesses can apply for an exception from VAT registration if they meet the criteria.
6. Additional Compliance for Input Credit on Imported Services:
Many businesses pay for services from overseas providers based on agreements without formal invoices. Recent changes in VAT laws specify that for the import of services, businesses can recover input credit only if they receive and retain invoices in accordance with VAT regulations.
7. Construction Sector and Retention Payments:
In the construction sector, when the time between progressive milestones for delivering goods or services and the claims for retention payments exceeds 12 months, VAT may still be applicable. A specific date of supply for VAT purposes has been introduced, the date of expiration of one year from when the goods or services were provided.
8. Deemed Supplies to Related Parties:
Previously, deemed supplies, like providing goods/services free of cost (FOC) to related parties, could trigger a VAT liability under existing laws. Under the amended VAT laws, a company may not have a VAT liability for FOC goods or services provided to related parties if the recipient company is eligible to recover 100% input credit on its purchases.
These updates address VAT implications in the construction sector, particularly concerning retention payments, and clarify the treatment of deemed supplies to related parties, considering their input credit recovery eligibility.
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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.
