Filing VAT Returns in the UAE? Avoid these Common Mistakes
Since January 1, 2018, when VAT was introduced in UAE, businesses have been required to comply with multiple requirements under the VAT Law. Filing VAT returns to the Federal Tax Authority (FTA) is an important activity for all businesses that are registered for VAT. However, you need to be extra careful while filing VAT returns since some common mistakes generally occur in this process. Seeking the help of VAT consultants in Dubai is a better solution.
In this article, we give you a list of the most common errors companies make in filing their VAT returns, thereby resulting in the imposition of fine
Marking Sales in the Wrong emirate
Most businesses make the mistake of entering the sales in the wrong emirate while filing VAT returns in the UAE. This mistake happens when the business owners categorise their standard rated sales based on the customer’s location. However, you are expected to classify your standard-rates sales based on the fixed establishment. A fixed establishment is any fixed place of business where you regularly conduct business activities.
Forgetting to Include Zero-rated and Exempt Sales
Most of the companies file the output and input VAT properly but forget to mention zero-rated and exempt sales. Business owners mistakenly think that only standard-rated transactions need to be mentioned in the UAE VAT returns. Tax agents in Dubai strongly suggest you mention zero-rated and exempt sales correctly and disclose them properly in the VAT return filing.
Claiming VAT Return on Expenses that are not Permitted
Very business incurs certain common expenses on a daily basis. However, the UAE VAT Law doesn’t permit the taxable persons to recover VAT incurred on certain expenses. However, due to lack of knowledge, many businesses commit the grave mistake of claiming expenses that are not allowed. A taxable person often commits such mistakes when they fail to get assistance from VAT consultants in Dubai. The assistance of VAT experts could have saved many businesses from committing mistakes that arise from a lack of knowledge about VAT rules in the UAE. The following are Some of the expenses on which input VAT recovery is not allowed under VAT in the UAE
- Entertainment expenses
- Motor vehicles used for personal purposes
- Employee related expenses
Failing to Account for Reverse Charge Mechanism
Businesses must account for Reverse Charge Mechanism (RCM) while importing goods or services into the UAE. In normal transactions, the supplier supplies goods and collects VAT on behalf of the customers, which will be later paid to the government. Under RCM, the supplier need not pay for the VAT on import items. The buyer or end customer is obliged to pay the tax directly to the government under RCM. Unaware of this rule, many businesses fail to account for RCM while filing VAT returns in the UAE.
Failing to File UAE VAT Returns on Time
A registrant who fails to submit the VAT Return within the timeframe specified in the Tax Law is bound to pay a penalty of AED 1,000in the first instance. The FTA will slap a fine of AED 2,000 if the offence is repeated within 24 months. Tax registrants need to take extra care to remember the dates of filing their mandatory UAE VAT returns. A safe way to ensure this is hiring the best VAT consultancy firms in Dubai who will provide timely reminders to the taxable persons.
Mistakes in the calculation of VAT
The most important part of filing accurate VAT returns is the application of the correct VAT rates. However, businesses make mistakes in identifying the relevant rate of VAT for the goods and services, thereby leading to bigger errors in calculations and payments, which may lead to penalties.
Error in the usage of adjustment columns
Businesses do not understand the actual usage of adjustment columns in the VAT returns filing process. The actual purpose of providing an adjustment column is to provide the adjustment for bad debts or changes resulting from sales of commercial property. However, businesses tend to use the adjustment columns for correcting errors made in previous VAT returns filed. This leads to a change in the numbers, which might lead to further questioning and investigation from the FTA and/or penalties. Therefore, businesses must be extra vigilant regarding understanding the purpose of each column of information required to be filled in the VAT returns form.
How can VAT consultants in Dubai help?
To ensure an error-free VAT returns filing process, you can hire VAT consultants in Dubai, such as Jitendra Chartered Accountants. VAT consultants such as JCA can help you in two ways. Firstly, JCA can train your employees to file VAT returns in the UAE. Secondly, they can file the UAE VAT returns on your behalf. In addition, with our assistance, you will always be prepared for any sudden updates or changes in FTA rules. It includes readiness for an unexpected FTA auditing process.