Technical Challenges in VAT Declaration in the UAE

Value Added Tax (VAT) is an indirect tax imposed on most goods and services supplied at each stage of the supply chain. It serves as a source of income for the state to ensure the continuity of government services. The end consumer bears the cost of this tax, while companies are responsible for calculating and collecting it on behalf of the state. In this article, we aim to clarify the steps, conditions, and technical challenges related to filing VAT declarations. Find more detail from experts like vat registration UAE.

VAT Declaration in the UAE

The VAT declaration is the official document that entities and companies subject to VAT must submit to the Federal Tax Authority for each tax period. It should be submitted within 28 days from the end of the specified tax period in the UAE, based on a periodic basis.

The tax period is the specified time frame for calculating and paying the due tax. It is three months for businesses with annual revenues less than AED 150 million and one month for businesses with equal or exceeding AED 150 million in annual revenues.

The Federal Tax Authority may, at its discretion, determine a different tax period for certain businesses subject to VAT, with adherence to the instructions for filing tax declarations.

The VAT declaration must include

1. Value of taxable supplies at the standard rate made during the tax period and output tax by emirate.
2. Value of any supplies subject to reverse charge during the tax period, excluding imported goods declared for tax on importation.
3. Value of zero-rated supplies during the tax period, if any.
4. Value of exempt supplies made during the specified tax period, if any.
5. Value of imports during the tax period based on the declared tax on importation.
6. Value of any adjustments to the above import item.
7. Value of all expenses subject to the standard VAT rate and recoverable input tax, including recoverable tax.
8. Value of any expenses subject to reverse charge and recoverable input tax.

Filing VAT Declaration

The VAT declaration must be submitted through the electronic services portal of the Federal Tax Authority in the UAE. Before initiating the application, ensure that all requirements for the VAT declaration are prepared clearly.

There are four steps to submit the VAT declaration

1. First, log in to the electronic services portal on the Federal Tax Authority’s website and select the VAT tab to access the registered declaration.
2. Second, fill in the VAT declaration form, including sales and other outputs by entering amounts exclusive of VAT, the VAT amount, and calculate the due tax for the relevant tax period.
3. Third, submit the declaration after carefully reviewing it by pressing the Submit button.
4. Fourth, pay the due tax to the Federal Tax Authority or request a tax refund if desired through the My Payments tab, ensuring strict adherence to payment deadlines.

VAT Refund Process

The Federal Tax Authority in the UAE has introduced a digital system for VAT refunds to eligible visitors, starting April 1, 2019. If eligible, the applicant must provide all additional supporting documents required for reviewing and auditing the refund request. Retaining original invoices for purchased goods during their visit to the UAE is crucial.

Challenges in VAT Declaration in the UAE

Several challenges are associated with VAT declarations in the United Arab Emirates, including non-compliance with submission deadlines. According to Cabinet Decision No. (40) of 2017 on administrative fines for violating tax laws, failure to submit tax declarations within the specified deadlines incurs specific fines

– AED 1,000 for the first failure, and AED 2,000 for subsequent failures within two years.

Additionally, failure to pay the stated tax amount in the VAT declaration or the assessed tax within the specified period incurs fines

– 2% directly from the unpaid tax for delaying payment.

– 4% on the seventh day after the payment deadline for the unpaid tax amount.

– 1% daily penalty on any unpaid amount for more than one Gregorian month beyond the payment deadline, up to a maximum of 300%.

VAT Registration Exemption

Businesses with annual supplies exceeding AED 375,000 are required to register for VAT. However, registration is optional if the total supplies amount to half that value, i.e., AED 187,500.

“VAT Registration UAE” offers comprehensive services, including VAT registration, tax consultations, filing declarations, and representing clients in various forms of tax disputes, including before the Tax Dispute Committees and Federal Courts.