Submitting VAT returns in the UAE can seem complex and daunting, but it doesn’t have to be. This guide covers everything you need to know about UAE VAT returns, from understanding their importance and role in the UAE’s tax framework to providing step-by-step instructions on how to submit your return. By reading this article, businesses will gain valuable insights that can help ensure compliance with UAE tax regulations, avoid potential financial penalties, and run their operations more effectively.
Understanding UAE VAT Returns
In the UAE, VAT returns play a key role in the tax framework. They summarise the value of the supplies and purchases you’ve made during a tax period and reveal your VAT liability. Your VAT liability is the difference between the payable output tax (VAT charged on supplies of goods and services) for a given tax period and the input tax (VAT incurred on purchases) and recoverable tax due for the same period.
Suppose you’re a registered taxpayer in the UAE. In that case, you’ll need to generate and file a VAT return once every tax period, which could be either a month or a quarter. Businesses must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold. As a VAT-registered business, you’ll need to charge VAT on taxable goods or services you supply, and you may reclaim any VAT you’ve paid on business-related goods or services.
Submitting accurate VAT returns helps businesses comply with UAE tax regulations and avoid potential financial penalties. VAT returns are vital to the UAE’s tax framework, requiring businesses to accurately report their taxable supplies and input tax credits to the Federal Tax Authority (FTA). If you don’t comply or if you submit erroneous VAT returns, it can have significant implications for your business, including penalties and reputational damage.
A VAT return is a document summarising all of the sales and purchases you’ve made during a particular tax period. It must be generated based on invoices and filed through the FTA e-portal. The VAT return form is known as ‘VAT 201’, which you’ll need to fill and submit to complete the VAT Return filing. The form VAT 201 is broadly categorised into 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 Authorised Signatory.
The UAE’s VAT return filing deadline is the 28th day of the month following the tax period. Should the due date occur on a weekend day or national holiday, this deadline will be extended to the next business day. The standard tax period for a taxable person in the UAE is three calendar months. Still, the FTA may assign different tax periods for certain groups of taxable persons. You could face fines if you fail to file a tax return within the specified time frame.
When preparing to file VAT returns in the UAE, there are several key steps to follow.
The initial VAT return process step is compiling all relevant documentation. This includes records of all transactions made during the tax period. These documents form the foundation of your VAT return.
Maintaining precise records is a good business practice and a legal necessity for VAT compliance in the UAE. You must keep detailed and current records of all transactions. These records will be used to complete the VAT 201 form, which must be submitted electronically through the FTA’s e-services portal.
Before submitting the VAT return, it’s essential to validate all transactions. This involves ensuring all figures are correct and all transactions have been recorded correctly. The VAT 201 form requires comprehensive information about taxable supplies, supplies subject to VAT at 0% and 5%, and purchases or expenses on which VAT has been paid.
The VAT return also necessitates the calculation of the net VAT due for the period. If the output tax surpasses the input tax for the period, the difference must be paid to the FTA. If the input tax exceeds the output tax, the surplus can be offset against future payments due to the FTA.
Remember, not filing a tax return within the specified time frame can result in penalties, as per Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE. Therefore, ensuring that all transactions are verified and that the VAT return payable tax due is submitted promptly is crucial.
Completing the VAT 201 is a crucial step in the VAT return process. This form is divided into seven sections, each requiring specific data.
The first two sections, ‘Taxable Person Details’ and ‘VAT Return Period’, will auto-populate with your TRN, name, address, and details like the VAT return period for which you’re currently filing a return, the Tax Year end, tax registration number, VAT return period reference number, and the return due date for VAT.
The third section, ‘VAT on sales and all other outputs’, requires you to provide details of standard rate taxable supplies for the UAE, supplies subject to zero rate, exempt supplies, and supplies subject to the reverse charge mechanism.
In the fourth section, ‘VAT on expenses and all other inputs’, you’ll need to provide the details of purchases or expenses on which you’ve paid VAT (at a standard rate of 5%). You can also list supplies subject to reverse charge basis, which are eligible under the recoverable input tax.
The fifth section, ‘Net VAT Due’, shows the total value of output tax that’s due for the Tax Period, calculated based on the information declared in Sales and all other outputs.
The sixth section, ‘Additional reporting requirements’, is only for businesses who’ve used and applied the provisions of the during this period. If not, you can tick ‘No’ and move to the next section.
The final section, ‘Declaration and Authorised Signatory’, needs the authorised signatory details and a tick in the square next to the declaration section to submit the VAT Return.
The accuracy and timeliness of the information you input into the form is crucial. This includes the details of your sales and purchases, the VAT you’ve paid, and the VAT you’re eligible to recover.
The VAT return form needs the details at a summary level, meaning the consolidated information of Sales, Expenses, Output VAT, and Input VAT. These details need to be consolidated according to the format prescribed by the FTA.
Mistakes can happen, but correcting them as soon as possible is crucial to avoid penalties. If you spot an error or omission in your VAT return form, you can use the FTA’s Voluntary Disclosure Form 211 to correct it. This form lets you inform the authority of the error and correct it voluntarily before the authority finds it during a tax audit or through an assessment.
However, if the error or omission results in the input tax recoverable or the output tax payable being more than AED 10,000 for a particular period, the VAT Voluntary Disclosure Form 211 needs to be filled out to inform the authority. Suppose the discrepancy is less than AED 10,000. In that case, you can correct such errors in the subsequent VAT Return without a separate disclosure.
Remember, penalties apply for using the VAT Voluntary Disclosure form 211, so it’s always best to get it right first. If you need more clarification, consider getting help from professional VAT consultants. They can help ensure your VAT return form is filled out correctly and submitted on time, helping you avoid potential financial penalties.
The process of submitting a VAT return in the UAE involves three main steps:
- Accessing the FTA’s e-services
- Uploading and submitting the VAT return form
- Receiving confirmation of your submission
The initial step in the VAT return submission process is to access the FTA’s e-services. These services are accessible through the UAEPass registration system, which you can access 24/7 on the FTA website. The process for registration is straightforward and can be completed in just 15-20 minutes.
To register, visit the FTA website and click on the “Registration” button. After registration, you’ll receive an email verification. After verifying your account, you can access the e-services portal.
Ensure you have all the necessary documents and forms ready for your online application. This might include valid trade licences, passport/Emirates ID of the authorised signatories, proof of authorisation, contact information, and bank letters validating the bank account details.
Once you’ve accessed the e-services portal, the next step is to upload and submit your VAT return form. To do this, click on the “VAT 201 – New VAT Return” option under the e-services section of the portal.
Ensure all the data from your source system is correctly uploaded to the tax engine. You can do this by reconciling the number of entries between the source and tax systems and matching the total values between the two systems.
When filling out the form, include details of your standard-rated supplies, zero-rated supplies, exempted supplies, and any goods imported through UAE customs. Ensure all the necessary information is included and that the form is arithmetically accurate.
After submitting your VAT return form, you’ll receive a confirmation message from the FTA. This confirmation validates your submission file VAT return and is an essential record for your business.
Suppose you have any VAT liability or administrative penalties. In that case, you can pay these through the e-Dirham, which supports payments through a credit card (Mastercard and Visa only) or an e-Dirham card.
By following these steps, you’ll be able to submit your VAT returns successfully. The VAT return submission process is a key part of the UAE’s tax framework, and accurate submission helps your business comply with the UAE’s tax regulations.
Once your VAT return has been successfully lodged, several crucial steps must be adhered to. These steps ensure your tax agency complies with the UAE’s tax regulations and help you evade potential financial penalties.
The initial step post-submission is to settle any VAT due. The total tax payable to the FTA is contingent on whether your input tax credits can balance your output tax. Should the output tax exceed your recoverable input tax, the surplus must be paid to your tax agent or the FTA.
The FTA provides various payment options, including online payment through the e-services portal. VAT can be paid using an e-Dirham card or credit card, Debit, Local bank transfer, or International bank transfer. Each option has its own transaction fees and processing times, so choose the one that best suits your business needs.
Timely payment is crucial to avoid penalties and interest charges. If you’re making partial payments, settle the full amount before the due date.
Post-submission, you’ll receive an acknowledgement from the FTA. It’s advisable to retain this acknowledgement for future reference.
You might receive communication from the FTA if there are any queries or discrepancies in the VAT return. Prompt response and providing the necessary information or clarification are essential to resolve any issues.
Non-compliance with tax refunds or errors when lodging VAT returns can lead to severe consequences for businesses. The FTA can impose penalties for late or incorrect VAT return submissions.
The penalty for late submission is AED 1,000 for the first time and AED 2,000 for each subsequent time. Additionally, businesses can face penalties for errors or omissions in the VAT return, ranging from AED 3,000 to AED 5,000 per error. A maximum penalty of AED 10,000 as of 2021.
Awareness of these penalties and the importance of timely and accurate VAT return submission helps businesses stay compliant and avoid potential financial penalties.
Staying abreast of any changes or trends in VAT regulations in the UAE can help your business maintain compliance and evade any potential penalties. Regularly check the FTA’s website or subscribe to their newsletters for the latest updates.
Navigating the intricacies of VAT return submission in the UAE may seem overwhelming. But, with a good grasp of the regulatory framework and a strategic approach, it’s manageable.
Remember, being prepared, having a thorough understanding, and submitting on time is essential. You’ve got to keep accurate records and use technology to automate the process where you can. As your business grows, keeping up-to-date with changes in VAT regulations is a must.
Your journey through the VAT return submission process in the UAE is part of your journey towards building a compliant, successful business. Embrace, learn from, and let it guide you towards your financial success.