VAT has now been in force for over a month, and the first returns are beginning to fall due. For most businesses this will be the first tax return they have ever filed in the UAE. A little care now can prevent errors that are tedious to correct later.
The deadline
Returns, and payment of the VAT due, must reach the Federal Tax Authority by the 28th day after the end of the tax period. Late filing and late payment both attract penalties, so plan to finish your return several days early.
Mistakes to avoid
1. Reporting sales in the wrong emirate. The return asks for standard-rated sales to be split by emirate. Check that your system records where each supply is made, rather than putting everything under the emirate where you are based.
2. Missing the reverse charge. When you buy services from suppliers outside the UAE, or import goods, you usually need to account for VAT yourself. It is easy to forget because no VAT appears on the supplier’s invoice.
3. Claiming input tax without a proper tax invoice. Input tax can generally only be recovered if you hold a valid tax invoice. A receipt or a pro-forma invoice is not enough.
4. Claiming VAT on blocked expenses. VAT on certain costs, such as some entertainment expenses and motor vehicles available for personal use, cannot be recovered.
5. Including transactions from the wrong period. Supplies and purchases belong in the period of the tax point, which is not always the invoice date.
6. Treating exempt and zero-rated sales the same. Both appear in the return, but in different boxes, and they affect your input tax recovery differently.
Before you submit
Reconcile the figures in your return to your accounting records, keep a copy of your working papers, and make sure someone other than the preparer reviews it. If you find a mistake after filing, it can be corrected, but how depends on the size of the error.
If you would like a second pair of eyes on your first return, we are happy to review it before you submit.
This article is general information based on the rules as we understand them at the date of publication. It is not advice on your circumstances. Laws and practice change, so please speak to us before acting on it.
