The UAE government imposed VAT, or Value Added Tax, on firms with an annual revenue of more than AED 350,000. The VAT system was initially implemented in January 2018, following which enterprises in the UAE Mainland and Free Zones began charging VAT on all sales. Taxable enterprises must file their returns through the online FTA portal before the tax period expires. While doing so, many businesses make mistakes and end up paying excessive penalties.
Businesses must seek competent assistance from VAT registration consultants and file returns with no errors. The goal of this essay is to identify the most typical errors you may make when filing your VAT return.Here are the most common VAT filing mistakes to avoid in the UAE.
1. Making Calculation Mistakes
Miscalculations could be one of the initial pitfalls. Companies should be aware that incorrectly calculating payable taxes can result in enormous losses. A well-integrated and systemized approach must be implemented to ensure that the appropriate amount of taxes is charged on various commodities and services. Furthermore, businesses must stay up to date on the current VAT legislation in order to avoid errors and miscalculations.
2. Inadequate Documentary/Records
Maintaining an up-to-date record of the business’s ins and outs is critical to efficiently filing VAT returns. The UAE government ordered that taxable enterprises keep a full five-year record of sales, purchases, imports, exports, payment receipts, bank statements, transactions, and salaries. Failure to do so may result in unneeded trouble and harsh consequences.
3. Failure to record Sales that are exempt or zero-rated
At the end of the day, you may correctly file your VAT returns, containing every detail on the inputs, outputs, payables, and receivables. However, failing to report tax-exempt or zero-rated organizations might have a significant impact on your file. Companies must report exempted sales to the FTA in addition to their regular tax information.
4. Failure to submit the Reverse Charge Mechanism (RCM) Transaction
When a corporation imports products or services, the Reverse Charge Mechanism comes into play. In most cases, the supplier collects tax on each sale and remits it to the government via a return filing. In the case of RCM, when it comes to imported goods/services, the customers are responsible for paying the VAT directly to the government, while the supplier is not required to pay VAT on imported items. Many businesses neglect to complete RCM transactions, causing problems when filing their input VAT.
5. Inadequate planning and late submission
Having a pre-planned strategy in place to record transactions and stay up to date on the current VAT requirements helps protect your company from unnecessary fines. Because the VAT system is still relatively new, firms are still struggling to ensure systemization and planning when completing returns. As a result, many people miss the deadline and are penalized by the government. So, for efficient VAT filing, make sure to receive frequent VAT health checks and modify your business practices.