In January 2018, UAE implemented Value Added Tax (VAT) for the first time, instructing every business to follow the laws set by FTA (Federal Tax Authority). VAT plays a key role in compensating the declining revenue and keeping a close check and balance of expenses. That’s why every company is advised to be extra careful when filing for VAT registration, returns, or deregistration.
Most Common 9 Errors Made by Registered Companies During VAT Returns
Once you have paid your tax, you must file the VAT return for the confirmation of payments. Act vigilantly if you want to keep yourself safe from paying hefty fines and administrative penalties. People filing Value Added Tax returns themselves must try avoiding the following mistakes because being an industrialist or businessperson, you will probably not have time to deal with tax issues.
- Not Disclosing Zero-Rated and Tax-Exempted Sales
Have you been carefully filing for only standard-rated transactions without mentioning zero-rated and tax-exempted sales? If yes, then you are doing it half right!
Identifying and disclosing zero-rated and exempted transactions to the legal authorities is equally important. Like missing out on output and input VAT can cause you to pay heavy penalties, forgetting or hiding the record of zero-rated and tax-exempt sales can take your business downhill.
- Entering The Sales in The Wrong Emirate
Another common mistake is categorising standard-rated transactions per the consumer’s location while filing VAT returns in the UAE. The right emirate for sales is where you have your business running regularly and actively.
It must be based on a business’s fixed establishment – an official workspace or office with enough team force, technical assistance, and industrial resources for conducting business operations.
- Missing the Deadline
Getting busy in business meetings and forgetting about filing VAT returns before the proposed date – a very common problem.
For quarterly and monthly VAT returns filing, FTA has specified the deadlines, and in case of any delay, miscalculations, or omission errors, the taxpayer is penalised heavily. The administrative penalty for delays in VAT returns filing is worth AED 1,000 for the first time and AED 2,000 for the second.
Keep your tax filing schedule up-to-date, make sure you never miss out on filing a VAT return and save yourself from the last-minute panic episode!
- Mistakes in VAT calculation
Companies should keep the applicable Value Added Tax rates in mind considering their services and goods. Mistakes in calculations or disbursements will lead to consequences (punishments, fines, etc.)
- Carelessness in Maintaining a Detailed Invoice
Nimesh Goel said, “It is critical for businesses to develop their tax compliance strategy to contain the rise of non-compliance.” And it really is!
Without a well-structured strategy in place, you cannot keep your tax-record straight, and every tax-eligible person must have a detailed invoice ready for each return. Authorities can ask for transaction details anytime, even from the past years, and you should be able to deliver it within 5 business days.
- Appealing VAT Return on Outlays that are not Legalised
If you are a businessman, you must be aware of daily expenses. But that doesn’t mean you will be recovering VAT on each and every penny. Unfortunately, we have seen companies claiming VAT returns on expenses that are not allowed.
As per the VAT rules in UAE, the below-mentioned expenses don’t ask for Value Added Tax recovery:
- Entertainment/recreational activities
- Automobiles (vehicles) used for personal work
- Employee-related expenses
Are you still confused? Contact Profit Plus to get the necessary VAT assistance. Our VAT experts will guide you about the UAE VAT law.
- Errors in RCM
RCM stands for Reverse Charge Mechanism – a tax applicable on goods or services imported to UAE, which is paid by the buyer to the government directly. Most companies prefer not to link their Tax number with the taxpayer’s account, making it difficult to claim for input VAT along with bringing imprecisions in transactions as they forget to account for import transactions (covered under RCM) while filing VAT returns.
- Faults in Adjustment Columns
What tax-eligible persons don’t understand is that each adjustment column in the VAT returns filing process must be filled accurately and completely. They must be utilised for the adjustment of bad debts rather than mentioning and rectifying the mistakes that are done in previously filed VAT returns.
Fill every column with the right type of information. Or else, confusion in numbers can cause investigation and/or penalties trouble.
- No Proper Record-Keeping
Authorities are allowed to ask the VAT registered businesses to submit their previous VAT data. In fact, FTA has made it compulsory for all industries to maintain correct records of each sales invoices, purchase, inventory, tax paid on import and export goods, salary transfer, general ledgers, bank statements, credit and debit notes, employee benefits, and payment receipts from the past 5 years. For real estate, they must maintain a record of the last 15 years.
Keep it organized!
Put Your VAT Worries Behind with Profit Plus
We, specialised and reputable tax professionals in UAE, ensure that your VAT return filing procedure goes error-free with our expert-level guidance and professional support of qualified VAT accountants.
Whether it is about VAT registration, deregistration, or return filing, Profit Plus resolves tax issues thoroughly and delivers the right VAT solutions without exposing your business to any threats.