The value-added tax has been launched in the UAE, and businesses are working on making themselves VAT compliant. However, the confusion around VAT rules and compliance norms still persist. This guide will help you by explaining everything a business should do to get VAT compliant.
Note: The incorrection or fraud of any kind in the implementation of VAT by a UAE business will result in huge penalties.
Table of Contents
VAT Checklist for Businesses
Research and Understand VAT
The UAE government has provided a number of resources through its official website and other means for the businesses to get acquainted with the new tax system. Use these VAT resources and blogs to find out as much as you can about VAT to make sure that you understand what you are getting into and how VAT affects your business. This will also help you in finding out whether and on which of your products VAT is applicable.
Businesses with an annual turnover of Dh 375,000 are essentially required to register for VAT on or before the VAT registration deadline. The last date for VAT registration has been extended by the FTA to April 30, 2018. An administrative penalty of Dh 20,000 will be charged from businesses who register after this date.
Get your business registered for VAT now or hire a Chartered Accountant for the same.
VAT provisions in Business Contracts
Since the VAT has been made mandatory for the businesses in the UAE, companies are required to include the VAT clause in their existing and new contracts. If the contract doesn’t have a VAT clause, the price in question will be considered inclusive of VAT.
As per VAT law in the UAE, businesses are required to file quarterly (once in 3 months) VAT returns. The return and tax payment must be completed within 28 days after the end of a particular tax period.
Training your Staff
Whether or not your business comes under the VAT cover, you will still have to maintain proper accounting and business records as per regulations. This creates the need for an expert team of accountants. If you’ve got that already, make sure that your accountants are well-trained with the concepts and rules of the VAT. They should know how to account for VAT compliance and how to file VAT returns.
Hiring a Professional
If your business doesn’t already have an accounting expert or team, you may need to hire an accounting firm or accountant who can handle your business accounting records as well as file correct VAT returns on time.
Update IT Software and Systems
After the VAT implementation, businesses must look for a reliable VAT software that can handle various VAT related tasks, such as filing returns, generating invoices, etc. They should also consider upgrading their IT systems as well as professionals to make them VAT compliant.
VAT Management and Control
The most crucial part of VAT implementation in your company would be the sound and seamless management of various VAT processes. It is important that your company has a professional who knows about VAT laws and regulations and can take care of complexities if and when they arise.
You should stay in constant touch with your accounting team to know the process and status of VAT reporting and any changes the FTA may have announced regarding the VAT.
Apart from these, you may need to take care of the following things:
- Classify various business transactions according to VAT treatment
- Assess cash flow to identify VAT applicability on various transactions
- Analyse VAT impact on pricing and revise the rates of your products/services accordingly
- Revise existing business contracts to include VAT clauses
VAT is not charged on the revenue of a business, only on transactions. The revenue parameter is only used for determining the VAT eligibility of a business.
In addition, it is also very important that your organisation seek regular help from a reputed VAT consultancy to confirm your compliance with VAT rules and regulations.