VAT Compliance Requirements in UAE

What is Compliance? Compliance basically means conforming by the statuary rules and regulations prescribed. Further, it means filing certain forms and information with the central government from time to time. After the implementation of VAT all the companies must ensure that they obtain VAT registration in case their annual turnover exceeds the threshold limit. After obtaining the registration the taxpayer is required to fulfill the compliance requirement of VAT specified by the Federal Tax Authority. Every business entity must fulfill all the compliance in order to avoid hefty penalties and any proceedings.

Registration

All the Business entities whose annual turnover exceeds the threshold limit of AED 375,000 are mandatorily required to register under VAT by 4th December 2017. Further, businesses can also register for VAT voluntarily. Voluntary registration can be sought when the annual supplies are less than the mandatory registration threshold but more than voluntary registration threshold of AED 187,500/-.In addition to this, the business entity whose annual turnover is less than AED 187500/- is not required to obtain VAT registration.

In order to avoid any penalty, the business entities are required to obtain timely registration of VAT.

Filing of Returns

Every company which has obtained VAT registration is required to file VAT Returns periodically. Depending upon their annual turnover companies will be expected to file returns every quarter or every month depending on their turnover.

The business entities are required to compile the data on tax paid and tax collected. Further, the business entities are required to file the returns following the computation guidelines.

A tax liability can accrue as early as the date on which an order advance is received. In case no advance is received then the date of delivery or invoice, whichever is earlier will be taken into consideration.

Keeping the record

In order to comply with the various provisions of the VAT like filing returns, the business entities are recommended to keep accurate records of all the transactions undertaken. Also, it is mandatory for all the business entities to keep the business records for a time period of 6 years just in case the regulatory authorities are to conduct an investigation on the business.

Audit of records

The accounts of the company may be audited on the demand made by the Government directly or indirectly through on its own or by its appointed agents. It is mandatory for all companies to maintain physical records of all purchases and supplies. Also, companies are required to maintain complete registration details of suppliers and customers.

Although a complete digital system for tax filing will be in place, the government may expect companies to furnish proof of returns. The VAT will be based on Self-Assessment and the onus will be on the companies to accurately account for the output and input tax.

 

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