Reflechir VAT Services
Professional VAT Consultancy Services in UAE
Ensure Compliance, Avoid Penalties, and Maximize Your Tax Efficiency with Our VAT Solutions.
Request a call back?
Drop us a message using the form below!
What is Value Added Tax (VAT) in UAE?
Value Added Tax or VAT in short, is an indirect tax imposed on the consumption of goods and services at each point of sale in the UAE. For most products and services, a 5% of VAT tax is levied whereas some categories are subject to a 0% rate for the VAT. This tax was first introduced in the UAE on 1 January 2018. The idea behind the VAT tax was to create a new income stream for the UAE Government so that they may be able to use it to improve the quality of life for the general public.
At Reflechir, we offer expert VAT consultancy services in the UAE so that you may be able to understand and navigate the complex VAT landscape. Our professional VAT consultants offer you guidance in terms of VAT registration, refund, deregistration, and your general queries regarding the Value Added Tax (VAT).
Criteria for VAT Registration
Businesses are required to undergo VAT registration under the following circumstances:
For UAE-Based Businesses
If a business based in the UAE surpasses a threshold of AED 375,000 in the past twelve months or is expecting to surpass in the coming 30 days, for the taxable supplies and imports.
For Non-UAE Business
If a non-UAE business engages in taxable supplies within the UAE, irrespective of the value, and there is no other party obligated to settle the due tax on these supplies in the UAE.
Voluntary Registration
UAE based businesses have the option to register for VAT when their supplies and imports exceed AED 187,500 for the past twelve months.
Fulfilling VAT Filing Requirements: A Comprehensive Overview
After registering for VAT in the UAE, a business must file their VAT returns to make sure that they don’t become liable for any kind of VAT penalties. Here are the basic VAT filing requirements that any business should know:
- The business must file the VAT return and make the related payment within 28 days from the end of their tax period.
- To fill out the VAT return, the taxpayer must go to the official FTA portal.
- Once logged into the portal, they need to fill out the VAT Return Form named VAT 201.
- A VAT return must include the value of supplies and the purchases a taxable person has made during the tax period.
VAT Penalties for Non-Compliance in the UAE: Understanding the Consequences
VAT compliance is essential in the UAE to avoid unnecessary penalties. Below is a brief overview of the consequences in the case of non-compliance:
1 Day After Due Date
2% of the unpaid tax is due 1 day after the due date of VAT return filing.
1 Month After Due Date
4% will be applied to the outstanding balance on the same day every month starting from one month after the VAT payment is due.
Tax Cap
A 1% per day penalty will be applied on any amount that is still unpaid one month after the deadline for payment, up to a maximum of 300%.
Failure to Keep the Records
AED 10,000 is charged to the taxable person if they fail to keep the required financial records such as tax invoices and books of accounts specified in the tax law.
Failure to Register for VAT
If an eligible person doesn’t register for VAT within the mandatory time, they have to pay AED 10,000 as a penalty for late registration.
Incorrect VAT Return
AED 1,000 for the first time and AED 2,000 in case of repetition will be charged in the current VAT return filing.
Understanding VAT Refunds in UAE
A taxable person is eligible for a VAT refund if the input tax is greater than the output tax on a VAT return. The taxable person can file for a refund after filing a VAT return. Here is how it works:
- When a taxpayer submits a claim for a VAT refund, FTA reviews their application within 20 days of submission.
- The taxpayer is notified during or after that time regarding the acceptance or rejection of their application.
- The taxpayer can file for the refund by visiting the FTA e-Service Portal.
- The taxpayer has to fill out the VAT refund form to submit their application.
- Once the claim is approved, the refund will be processed in 5 business days.
VAT Deregistration: Procedures and Considerations
If the taxpayer stops making taxable supplies and they do not expect to make them in the next 12 months, they are eligible for VAT deregistration. Also, if the taxpayer’s turnover for the last 12 months has been less than AED 187,500 and they do not expect to exceed it in the next 30 days, they are eligible for deregistration.
Submit the Application
The taxpayer has to submit a deregistration in the EmaraTax portal.
Filing the Final Return
The taxpayer has to file the final VAT return to the FTA.
Settling the Liabilities
Taxpayers must settle all outstanding liabilities or submit refund applications.
Important Consideration
Taxpayers must submit the VAT deregistration within 20 business days in case they meet the conditions for registrations.
Late Deregistration
Late deregistration results in a penalty of AED 1,000 per month up to AED 10,000.
Approval
The taxpayer must keep filing the VAT returns until their deregistration request is approved.
FAQ's
Your Comprehensive Guide to Common Value Added Tax Questions
Value Added Tax (VAT) is a consumption tax imposed on goods and services. In the UAE, VAT was introduced on January 1, 2018, as part of the government’s efforts to diversify revenue sources.
Businesses with the turnover exceeding the mandatory registration threshold are required to register for VAT.
The standard VAT rate in the UAE is 5%. However, certain goods and services are subject to a zero rate or exempt from VAT.
Some essential goods and services, such as certain food items, healthcare, and education, are zero-rated. Exempt items include residential property leasing.
Businesses are generally required to file VAT returns on a quarterly basis. The deadline for submission and payment is 28 days from the end of the tax period.
Yes, registered businesses can reclaim VAT on eligible business expenses. It’s important to maintain proper documentation and adhere to the guidelines set by the Federal Tax Authority (FTA).
Yes, there are penalties for non-compliance, including late filing and payment penalties. The FTA may also impose fines for other violations, such as improper record-keeping or failing to issue tax invoices.
Imported goods and services are generally subject to VAT. The responsibility for VAT payment may lie with the importer or, in certain cases, the recipient of the goods or services.
Businesses must maintain proper records, including tax invoices, accounting records, and other documents as specified by the FTA. This documentation is crucial for the accurate filing of VAT returns and compliance with the law.
Maximize Your Financial Efficiency with Expert VAT Services
Our seasoned professionals ensure compliance precision, boosting your confidence in today’s dynamic business landscape.