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One of the common mistakes a VAT-registered business makes is while filing VAT returns. If you are new to this, you also might have inadequate information on the matter. This can be dangerous as it can cause penalties to your business.
VAT returns are filings a business has to make after a specific interval. These return filings are made to the Federal Tax Authority (FTA). The purpose of VAT returns is to show how much VAT was collected and paid by the business during that period. An additional purpose of these returns is to show that a business is working properly and its financial documents are in place.
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As per the guidelines set by FTA, usually VAT returns are made quarterly. However, some businesses may be required to file their VAT returns every month, depending on their size. Additionally, you must strictly adhere to the submission of VAT returns. Failure to do so can lead to penalties, which can be quite costly. If you are unsure, you can get help from tax consultants in Dubai. This way you can always stay on top of matters related to taxes and avoid all penalties.
There are four basic components of a VAT return. They are listed as follows:
When working on this component you should keep the following things in mind:
Simply put, taxable supplies are all those goods and services that are subjected to VAT. When you are filing a return you specify all the goods and services on which you charged VAT. Along with that exempt goods must also be mentioned.
Output VAT is the amount of VAT a business charges when selling a good or service. For example: if a bed is sold for AED 100 and a VAT of 5% is charged, the output VAT would be AED 5. Although the customer pays AED 105, the business only gets to keep AED 100. Whereas, the AED 5 worth of money is tax which is deposited later to the government. A business must declare how much VAT it charges and is liable to pay the government. It is advised that businesses hire professional accounting firms in the UAE to avoid any discrepancies or errors in the data.
Input VAT is the amount of VAT a business pays when it purchases goods or services for use in its operations. The business can later claim this VAT from the government. It also lowers the amount of VAT you owe to the government. In case, your input VAT exceeds the output VAT, the business can also claim a refund. This difference can also be carried over to the next tax period.
Net VAT payable is the total amount of VAT your business owes to the FTA. This is calculated after subtracting input VAT from output VAT. If the output VAT is higher than the input VAT, it must be paid by the business. However, if the input VAT exceeds the output VAT, it is refunded by the government.
Filing a VAT return in the UAE is quite simple and can easily be done with the help of a chartered accountant. For your VAT return to be accurate, your bookkeeping should be up-to-date and have accurate data. Conflict between the two can have issues for your business in the form of penalties.
VAT filing can be broken down into three simple steps. They are:
To fill out the VAT return form, you can log on to the FTA website with your credentials. You can then proceed to enter all the details regarding taxable supplies, exempt supplies, etc. While filling out the form, always make sure that the data is accurate. A good way can be to double-check the data before entering it. You should also have the supporting documentation readily available to prove your claims.
Before submitting the form, it is best to review your application. You should double-check all the information entered. Any error in the data can lead to penalties. Thus, it is advised to always seek professional help while filing VAT returns. Finchoice Solutions has a team of experts that provide excellent services. Our professionals are trained to fill out all these forms and ensure that you have the correct data available at all times.
The final step is to pay all the VAT that is payable by the business. It is important to note that the VAT must be paid within the due date. Failure to do so can result in heavy fines by the FTA. As per the guidelines of FTA, businesses are liable to an immediate penalty of 2% of unpaid tax on missing the due date. Whereas, a fine of 4% will be implemented after 7 days. Failure to pay the fine within 7 days will ultimately result in a 1% fine daily which can go up to 300%. Thus, it is crucial that all your documents are accurate and readily available and that you file VAT on time.
The payment process is quite simple. You can pay the VAT through the FTA portal. The users are usually prompted with methods such as bank transfer, credit card, etc.
VAT compliance is crucial to avoid heavy penalties. Engaging a professional tax consultant and auditing company in Dubai is important. Firms like FinChoice Solutions offer 24/7 availability of trained professionals dedicated to client satisfaction. With over 30 years of industry experience, we are well-versed in VAT regulations.
To ensure compliance:
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