VAT has now been in place in the UAE for a full year. Most businesses have filed four quarterly returns, many have been through their first year-end with VAT in their accounts, and some have already had questions from the Federal Tax Authority. Looking back, a few lessons stand out.
1. Good records make everything easier
Businesses that kept their books up to date throughout the year filed returns quickly and with confidence. Those that relied on a scramble at the end of each quarter made more mistakes and spent more time fixing them. VAT has turned bookkeeping from a year-end task into a quarterly discipline.
2. The reverse charge is still being missed
Services bought from overseas suppliers, such as software subscriptions, advertising and consultancy, are a frequent blind spot. VAT is due under the reverse charge even though no VAT appears on the supplier’s invoice.
3. Small invoice errors add up
Missing TRNs, VAT shown in the wrong currency and invoices addressed to the wrong entity have all put input tax claims at risk. Fixing invoice templates and supplier onboarding pays for itself quickly.
4. Classification matters
The difference between zero-rated, exempt and out-of-scope supplies has caught out many businesses, particularly in property, education, healthcare and exports. Each has different evidence requirements.
5. Errors can be corrected, but the method matters
Many businesses have discovered errors in earlier returns. Depending on their size, these can be corrected in a later return or need a voluntary disclosure. Dealing with them promptly, rather than waiting, keeps penalties lower.
Looking ahead
The second year of VAT is a good time for a health check. Review a sample of transactions from 2018, confirm that your systems and processes handle VAT correctly, and correct any errors you find before the FTA finds them.
If you would like us to carry out a VAT health check for your business, please get in touch.
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.
