Understandably businesses in the UAE surmount several challenges. When coming to Value Added Tax (VAT) compliance, and most of them make errors that result in penalizations and legal hassles.
As experts in accounting and tax services, we have created a comprehensive guide to help you avoid the most common VAT-related mistakes in UAE.
This guide covers the most important aspects of VAT compliance, including registration, invoicing, record-keeping, and filing.
The introduction of VAT in the UAE has led to warrant cardinal changes in the way most businesses operate.
VAT compliance is now deemed a mandatory legal requirement, and all businesses must follow suit ensuring they follow the rules and regulations set by the country’s Federal Tax Authority (FTA).
This idyllic VAT guide is there to help businesses across the UAE to better understand the most common VAT-related unwarranted errors that are unforgivingly penalized and ways to avoid them.
Mistake #1: Failing to Registering for VAT on Time
The most common error most businesses make is not registering for VAT on time.
According to the FTA, all businesses exceeding the mandatory registration threshold of AED 375,000 in an entirety of a 12-month period must mandatorily register for VAT within 30 days.
And failure to do so can result in heavy penalizations and drag in unnecessary legal hassles.
Mistake #2: Incorrect Invoicing Details
Incorrect invoicing is another common mistake that most businesses make when coming to VAT registration.
Invoices must ideally include all specific details, such as the VAT registration number, the total amount, and the net amount of each transaction.
Oftentimes failure to include these details can again result in incorrect invoicing issues that lead to unwarranted penalties and legal involvements.
Mistake #3: Not Up-keeping Proper Records
Upkeeping proper transaction records is essential for maintaining a healthy VAT compliance.
Businesses must up – keep digital records of all transactions, including all sales invoices, purchase invoices, and credit notes. Often times failure to keep proper records can result in penalizations and uncalled for legal issues.
Mistake #4: Issuing incorrect Credit Notes
Issuing correct credit notes is also of equal if not more importance when coming to maintaining an idyllic VAT compliance in the UAE.
Businesses must mandatorily issue credit notes that showcase the correct VAT amount within a specified time frame as per the FTA mandates.
Failure to issue correct timely credit notes can again result in penalties and bring in uncalled for legal scenarios.
Mistake #5: Not Filing VAT Returns Right on Time
Filing VAT returns on time is an absolute must for Harnessing the benefits of an idyllic VAT compliance.
All businesses must file their VAT returns within 28 days of the end of each tax period. Failure to file VAT returns right on time can again lead to unfortunate penalties and legal issues.
Mistake #6: Not Paying VAT right on Time.
Paying VAT on time is the most crucial step when coming to an ideal VAT compliance.
All businesses in the UAE must pay their VAT within 28 days towards the end of each ordained tax period. Failure to pay the mandated VAT right on time can furthermore result in penalizations and unwarranted legal issues.
Mistake #7: Not Understanding the VAT Exemption Rules
Understanding the VAT exemption rules is extremely important for most businesses dealing with exempt supplies. Although Exempt supplies are not subjected to VAT, Howey businesses must be keeping an idyllic record of all these supplies.
And failure to understand the mandated VAT exemption law can result in unforeseen hefty penalties and unwarranted legal brawls.
Mistake #8: Not Seeking Timely Professional Help
Finally, not seeking a timely professional vat consultants in UAE is a common mistake that most businesses unfortunately make and pay for later.
VAT compliance can be highly complicated, and seeking professional help can ensure that most businesses follow the mandates rules and regulations set by the FTA.
Indubitably VAT compliance is mandated for all businesses across the UAE. And the most commonly overlooked overlooked VAT-related errors can lead to severe penalizations and legal hassles, but however these mistakes can be easily avoided with legally registering for VAT on time, invoicing all transactions, proper record-keeping, and filing your VAT returns on time. Paying VAT on time, understanding the exemption rules, and seeking professional help can always go a long way.
With this in-depth guide we encourage businesses to walk past all guess works and genuinely seek expert professional help for all their UAE VAT needs whenever in doubt.