The VAT (Value Added Tax) system in the United Arab Emirates mandates businesses to file timely VAT returns to stay compliant with the regulations of the Federal Tax Authority (FTA). Under this process, businesses are required to submit VAT returns based on their taxable supplies. Moreover, it should be in an accurate format explaining the details of input tax, output tax, and other necessary information. In this blog, we will explore the essential documents required for VAT Return Filing in UAE and other requirements pertinent to the VAT return filing.
VAT Return in the UAE
VAT return is a process where all VAT-registered businesses in the UAE are required to present a formal statement to the Federal Tax Authority detailing the output VAT (VAT collected on sales) and the input VAT (VAT paid on purchases) during a specific tax period.
The filing of VAT returns can be done quarterly or monthly depending on the size and type of the business. It includes details about the total sales, purchases, and other adjustments from previous tax periods. If the output tax exceeds the input tax, the taxpayer is required to pay the difference amount to the government. Conversely, if the input tax exceeds the output tax, the taxpayer has the right to claim a refund from the authorities.
According to the FTA guidelines, businesses are required to file their VAT returns within 28 days of the end of the tax period.
Importance of VAT Return Filing in UAE
Filing VAT returns is an essential requirement for VAT-registered businesses for several reasons:
- Legal compliance – The VAT law in the UAE decrees VAT return filing for all registered entities. Non-compliance can lead to hefty consequences, such as fines, penalties, and even suspension of trade license.
- Financial management – With accurate VAT filings, businesses can maintain precise financial records, manage cash flow, and make informed decisions.
- VAT refunds – Businesses with input tax exceeding the output tax can claim a refund from the government. This helps in improving cash flow and managing funds for further investment.
- Avoiding penalties – Through timely and accurate filings, taxpayers can avoid significant penalties imposed by the FTA for non-compliance, thereby maintaining a good legal standing.
- Credibility and trust – Businesses that consistently comply with VAT regulations tend to gain trust and confidence from customers, suppliers, and investors, which eventually enhance the reputation of the business.
Core elements of VAT return filing in the UAE
When filing VAT returns, businesses must adhere to the specific requirements to ensure compliance with UAE VAT laws. For accurate and timely submissions, it is crucial to understand the critical aspects of the process. So, here’s an overview of the key components involved:
Tax periods – Based on the taxable supplies of the business over the previous twelve months, the FTA determines the frequency of VAT returns. For instance, businesses with supplies exceeding AED 150 million are required to file their VAT returns monthly, while those between AED 37.5 million and AED 150 million must file quarterly. On the other hand, businesses with supplies below AED 37.5 million can file biannually, which means every six months.
Due dates – According to the UAE VAT law, the VAT returns need to be filed by the 28th day of the month following the end of the tax period. However, entities that are registered as VAT groups can enjoy an additional grace period of 15 days, which means they can file by the 15th day of the following month. Businesses must ensure to adhere to these deadlines to avoid penalties and legal consequences.
Filing methods – There are two different methods for businesses to file VAT returns in the UAE. First, they can file electronically via the official portal of the FTA, EmaraTax. Second, they can engage a tax professional to manage the filing process. Professionals like Shuraa Tax ensure compliance with VAT regulations and provide peace of mind for businesses from complex tax requirements.
Thus, by understanding the requirements of VAT Return Filing in the UAE, businesses can direct the process more effectively and avoid potential issues.
Documents required for VAT Return Filing in UAE
There are specific documents required for VAT Return Filing in UAE. Hence, businesses must ensure to prepare them in advance to complete the process successfully –
- Trade license – A trade license serves as legal proof for VAT registration and future filings, and therefore, is an essential prerequisite for all businesses operating in the country.
- Tax Registration Certificate (TRC) – Businesses, upon VAT registration, receive a Tax Registration Certificate from the FTA that includes a VAT registration number, which is vital for VAT Return Filing in the UAE.
- Tax invoices – Businesses must issue tax invoices for every transaction, including essential details like information about the supplier and recipient, VAT amounts, and descriptions of goods or services.
- Purchase invoices – These are the records of the taxes paid by the company on goods purchased for production purposes. It can be used to claim input VAT credits.
- Financial reports – These are business records that provide a comprehensive picture of the company’s economic activities, which can further be used for precise VAT calculations. These reports include cash flow statements, balance sheets, and profit and loss statements covering the applicable tax period.
- Import/Export declarations – Businesses engaged in international trade need this document as evidence of import and VAT payment.
- Credit notes and debit notes – These documents adjust previously issued invoices for errors, returns, or cancellations. Hence, to maintain correct VAT records, businesses must ensure proper documentation and justification of these notes.
- Audited financial reports – Businesses that are subject to external audits are required to provide audited financial reports among the documents required for VAT Return Filing in UAE. These reports must be prepared meticulously to avoid penalties from the FTA.
Additional requirements – In certain circumstances, taxpayers may also be required to provide specific details such as,
- Profit Margin Scheme
- Goods transported to GCC States
- VAT Paid on Personal Imports
- Transportation of Goods
Key points to remember while filing VAT return in the UAE
Businesses must take note of the following points when filing VAT returns –
- All the amounts must be mentioned in AED (UAE Dirhams)
- The amounts must be rounded off to the nearest fields
- The deadline for submitting the VAT return is the 28th day following the end of the tax period. However, if it falls on a weekend or public holiday, the deadline would be extended to the next business day.
- Failure to timely submission of VAT returns can result in penalties. For instance, AED 1,000 is the initial fine, followed by AED 2,000 for repeat offenses within 24 months.
Let Shuraa help you with VAT return filing
Navigating the process of VAT return filing can be challenging, especially when it comes to ensuring that all documents required for VAT Return Filing in UAE are well in order. With the expert services offered by Shuraa Tax, you can meet compliance standards set by the FTA, submit accurate VAT returns, and avoid costly penalties. They will help you stay organized and compliant while you focus on running your business efficiently.
Contact Shuraa Tax today at [email protected] and learn how they can assist with various VAT obligations including VAT registration and return submission, VAT registration UAE documents required, and other VAT compliance matters.
