The VAT tax regime was introduced at midnight of the new year 2018 by the UAE and KSA, two of the seven member nations of the GCC Council. The people, especially businesses, of these Persian countries, will now have records to maintain under VAT. In addition to explicitly stating the various records and accounts to be maintained, the new VAT law also clearly defines the time frame for these records.
All bookkeeping has to be maintained for a period of 5 years in the UAE. Further, the FTA enjoys complete authority to ask for details like Annual accounts, General ledgers, VAT Ledgers, Records of all supplies and imports, etc, from individual traders as well as business firms. Let us delve deep into the new world of the VAT and take a closer look at the records to be maintained under it.
Table of Contents
Accounts and Records to be maintained under new VAT Decree
A person taxable under VAT must maintain books or records for the following transactions made during a five-year business cycle:
1. All outward supplies made by the individual/trader or business firm.
2. Record of all goods and services imported as well as exported.
3. Record of all documents or invoices pertaining to the inward supply of goods and services.
4. All tax credit notes or alternative documents issued by the authority.
5. Any goods and services that was given or used and has been taxed but is not part of the business.
6. Record of goods and services that are due to receive input taxes.
7. Record of adjustments or corrections made to accounts or Tax Invoices
8. A Tax Record comprising of the following details:
- Detailed registry of all remaining dues on taxable supplies.
- Record of supplies that attract taxes paid on reverse charge.
- Tax liabilities after error correction and adjustments.
- Input tax to be regained after correction and adjustments.
- Recoverable input tax on imports or inward supplies.
Time Frame for maintaining Records and Documents
A taxable person in UAE is liable to maintain accounts and records for a period of five years in the new UAE VAT Tax LifeCycle.
Example: A Tax invoice relating to a tax period of January-December ’18, has to be kept safe till until 31st December ’23.
Records of capital assets like machinery, furniture, etc need to be maintained for a period of at least 10 years.
Real Estate records will have to be maintained for 15 years.
Penalty for Negligence
Any negligence or intentional errors in keeping VAT accounts in an organized and standardized form is bound to attract penalty and a substantial fine. The fine amount for first-time Tax offenders is AED 10,000. However, the fine increases to AED 50,000 in case of subsequent failure in maintaining required records, books and documents.
Hence, the new VAT regime has brought to itself new compliance parameters. Maintaining records and bookkeeping is not only tiresome as well as prone to human error. Certains records are to be mandatorily maintained. Hence it is a very apt solution to opt for software services that make the bookkeeping process frictionless as well as error free.