Value Added Tax (VAT) is a 5% general consumption tax that was implemented in the UAE on January 1, 2018, and it applies to the majority of goods and services transactions. Are you seeking information on how to pay VAT in the UAE? This article will provide you with all of the information you need to complete it correctly.
Businesses that provide taxable products or services must register with FTA if the total value of all supplies over the previous 12-month period exceeds the Mandatory Registration Threshold of AED 375,000. You must also register if the total value of all supplies is expected to exceed the Mandatory Registration Threshold in the next 30 days. Remember that there are fines for late registration.
Furthermore, firms may elect to register for VAT voluntarily if the total value of their taxable supplies and imports (or taxable expenses) reaches the AED 187,500 voluntary registration level.
The following is how it works.
- The UAE taxes registered enterprises on taxable supplies of goods or services at each stage of the supply chain.
- The tax that businesses collect from their clients is paid to the government.
- At the same time, they receive a government return for the tax they paid to their suppliers.
VAT Filing in UAE
At the end of each tax period, VAT-registered firms must file a VAT return to the Federal Tax Authority (FTA). VAT is filed electronically in the UAE using the FTA portal. The return can be filed by the taxable person or by someone authorized to do so on his or her behalf. You could, for example, employ a tax agent or authorized representative to perform it for you.
Taxable enterprises must file VAT returns with FTA and pay the tax within 28 days of the end of each business’s tax period, as established by FTA. If that date falls on a public holiday or a weekend, it must be filed the next working day after the holiday or weekend.
The normal tax period is as follows:
- quarterly for companies with yearly revenues less than Dh150 million
monthly for companies with an annual revenue of Dh150 million or more.
VAT Submission UAE
Businesses must file VAT returns electronically through the Federal Tax Authority (FTA) portal. Because offline methods to file VAT returns through XML and EXCEL are currently unavailable, the FTA Portal is solely designed to accept returns online. That implies taxpayers must manually enter the values for Sales, Purchase, Output VAT, Input VAT, and so on in the relevant areas of the VAT return form available on the FTA portal.
“VAT 201” is the name of the VAT Return form. You must fill it out and submit it online. Form VAT 201 is divided into seven sections:
- Particulars of the Taxable Person
- Return Period for VAT
- VAT on all sales and other outputs
- VAT on all expenses and other inputs
- Due Net VAT
- Additional reporting obligations
- Authorized Signatory and Declaration
Each of these sections contains many fields in which taxpayers must enter information in order to finish the VAT Tax return submission.
Before submitting the VAT Return, you should double-check all of the details. Only click the Submit button when you are certain that all of the information is correct. After successfully submitting the VAT Return, you will receive an email from FTA verifying the submission.
How to Pay VAT in UAE
If the output VAT in the VAT return is greater than the recoverable input VAT, the difference creates a VAT liability that must be paid to the FTA. Registered enterprises must pay their tax obligations to the Federal Tax Authority in one of the following ways:
- credit card issued by a UAE bank
- transfer of funds via bank
- The e-Dirham card
When you pay VAT using your e-Dirham card at the e-Service site, you must pay a transaction fee of AED 3. A credit card payment will normally carry a charge of 2% – 3% of the total due amount.
Partial payments are possible. However, you must pay the entire amount by the due date since there are penalties for late submission of a return or late payment of VAT. Furthermore, a taxable person may face a penalty if the information presented in a VAT return is erroneous.
Remember that, while tax returns must be submitted and paid electronically, you must also preserve accurate accounting records and papers relevant to your activity. This will allow the FTA to ensure that you have done everything correctly. These business records comprise documents such as the balance sheet, profit and loss account, payroll records, wages, fixed assets, records, and inventory statements.