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VAT Compliance

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VAT Compliance

As the deadline for the implementation of value added tax (VAT) draws closer, residents across the UAE are doing their best to come to terms with how the tax will be impacting their daily lives. Some companies are still struggling to navigate the compliance environment. Getting to VAT-readiness can be tricky and time-consuming if businesses lack the right support. We, with the help of our experts, help your business to become VAT compliant in order to avoid levy of heavy penalties as there are very strict provisions for non-compliance for deliberate tax avoidance, incomplete and incorrect filings by any taxable person.

A major block for governments in the UAE is the administration of tax as it has to build the experience and infrastructure to collect and enforce compliance.The government will rely on tax registered companies to collect the tax and deposit the tax periodically as per the schedule for filing returns.

The government will impose a Self-Assessment procedure. The onus will be on the registered company to compute the tax payable by the proper accounting of the Output VAT collected and adjusting against the Input VAT paid. The registered companies will be required to maintain the records for a specified period and present the records for scrutiny. This period will be initially set for 5 years in UAE.

Furthermore, it is unlikely that businesses have adequate and effective tax compliance processes and systems in place when they have never had to deal with taxation previously. As companies are required to file tax returns online, business management systems that can generate auditable tax returns and are flexible enough to implement any changes - rather than those that are manually generated by extracting data from spreadsheets - are the need of the hour.

Record-keeping in a VAT environment will involve the submission of tax invoices with a tax registration number (TRN) within 14 days of supply of the relevant product or service, as well as maintaining five years of records including debit and credit notes, and lists of VAT-exempt and zero-rated items - all in an auditable format. Therefore, businesses will need digital systems that can automate VAT processes such as accounting, invoicing, returns and audits.

VAT penalties will provide an added incentive for companies to prepare for compliance in an efficient manner and with minimal disruption to the business. Administrative penalties will be set at no less than Dh500 and no more than three times the amount of tax for which the penalty was levied, while tax evasion penalties can equal up to five times the relevant tax and a prison sentence.

To register for VAT in UAE, businesses must complete the required documents and we assist them in compiling these documents. Following documents are required for the registration of VAT in UAE. We make sure the business has all the documents in place before proceeding to the next stage. Here are the major points which we take into account:

  • Copy of Trade License
  • Passport copy of the owner/partners who owns the license
  • Copy of Emirates ID of the owner/partners who owns the license
  • Memorandum of Association (MOA)
  • Contact Details of company (complete address & P.O Box)
  • Concerned person contact details
  • Email of the concerned person
  • Bank Details including IBAN
  • Has the owner any other entity?
  • Income statement for the last 12 months (Signed & Stamped by the owner or the manager)
  • Expected revenue and expense for the next 30 days after VAT implementation
  • Are they exporting or importing?
  • Are they dealing with any custom department? If yes. What is the custom code? With the Copy of Dubai Custom Code Certificate
  • Are they doing business with any GCC country? (Country name)
  • If they are representing more than one entity, whether they want one tax group number for all the entities or separate tax numbers for each
  • Experience of business (Owners or directors involved in any previous businesses before for the last 5 years?)

Examples of actions and omissions that may give rise to penalties include, which our team of experts take into consideration and try to avoid are:

  • A person failing to register when required to do so.
  • A person failing to submit a tax return or make a payment within the required period.
  • A person failing to keep the records required under the issued tax legislation.
  • Tax evasion offenses where a person performs a deliberate act or omission with the intention of violating the provisions of the tax regulations.

Since the penalties are severe, it's better to avoid any documentation or any other accounting errors. This is where our expertise comes handy as we believe in providing end to end services, where our client has least risk exposure. We articulate and compile all the documents that are required to become VAT compliant and work in accordance with the all the demands and checklists proposed by the Ministry of Finance regarding VAT filing. Thus minimize your risk and avail our services at the most reasonable rate.

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