VAT is an indirect tax levied on the consumers by the government via businesses from 1st January 2018. Every VAT registered business must charge 5% of tax from its customers and transfer it to the government of UAE.
VAT is paid at every step of the supply chain. The maker will add extra value of 5% and charge it from the distributor. The distributor will pay 5% to the maker and collect it from its retailer. The retailer will add that cost to its products
and collect it from its customers.
In this supply chain, VAT id further classified as:
Output tax: the amount of tax a business is paying to the Government or other businesses on behalf of customers.
Input tax: the amount of tax a business is has paid to its suppliers.
Here arises the VAT liability, which is the difference between the input tax and the output tax, meaning, the amount of money collected from the customers and the amount of money paid to the suppliers
When the output tax that is tax collected from customer is more than the input tax, then the tax payer has to pay the difference to the concerned authority (FTA) via tax return.
When the amount collected is less than what is paid to the suppliers, then the tax payer needs to file return claim to the concerned authority (FTA) via tax return.
To claim the VAT liability, a VAT registered business has to submit a VAT return filing within 28 days at the end of each tax period.
A tax period is thetime for which tax is calculated and paid. According to Federal tax authority the standard tax period is:
A tax period can vary according to industry or by FTA.
Failure to file a tax return within the stipulated timeframe can lead to penalties by FTA according to cabinet resolution 40 0f 2017 on administrative penalties for violations of tax laws in the UAE.
The records you need to keep for filing of VAT return according to the government rules;
Apart from all these documents and some additional documents, every VAT registered business need to have these things accurately documented:
Hiring an experienced professional firm like us will ease your task of maintaining all these records as we are experts in auditing and record keeping.
For filing tax returns a business further need to provide the following records in every single tax return filed within 28 days at the end of a tax period:
If your output tax is more than input tax, then you have to pay the remaining amount within 28 days of the tax period.
If your output tax is less than the input tax, then you will receive the information about its approval from the FTA in 15 – 20 days of return tax filings. When your claim is approved, then the said amount will be carried forward to the
next tax period by the government. During payment of next tax period, the approved amount will be deducted.
Government will also check all the documents of a VAT registered business at regular intervals to make sure tax is being paid fairly.
We are a top auditing firm in Dubai who will help you maintain all your records in an appropriate manner so that no loss occurs to your business due to faulty record keeping.
Give us a call for more information about VAT return filing or any other accounting services you need.