Value Added Tax in the United Arab Emirates can be complicated. And understanding VAT, while you are busy running your business, can be difficult. Such a situation makes you more prone to making VAT errors and not complying with VAT rules correctly. There are many complexities involved in the operation of VAT, and they can lead to mistakes at some point and can have significant consequences. In this scenario, taking timely action is the primary key.
As FTA on finding these errors think you were careless or worse, you deliberately made the VAT errors.
Such errors may charge you with penalties ranging from 15% to 300% of the VAT due on top of the tax payable.
AM Audit as an approved Tax Agency, get visits from clients dealing with the same issue. So, to help you negotiate the complex rules of VAT, here are some of the common mistakes we see every day while going through our clients’ accounts.
(Read the whole article to know how to get 100% relief from VAT errors)
1. Keeping records
One of the errors that we frequently notice is the poor maintenance of the records. These include:
- Claiming VAT without the purchase invoices
- Missing sales invoices from the returns
- Duplication of the invoices
- Late filing or payment of the returns
2. Error during Reverse charge mechanism
Considering some clients’ incidents, while disclosing transactions in the VAT returns, they fail to include the transactions which are covered by reverse charging mechanisms because the reverse charge mechanism transactions don’t have Tax effects as such.
3. Time of supply
Complying with the tax point (point of supply) of the VAT is crucial as the FTA checks whether you charge VAT at the right time.
There are times wherein the clients mistake to insert the supplies in the wrong returns when the supplies are made at the end of the quarter.
4. Bad debt relief and credit note
The probability of errors in credit notes is more where the original sale invoice is not posted because cash-accounting applies, but a credit note is raised, and the VAT claimed. Hence, you should make sure the credit note is dealt with correctly in line with the original supply.
Claiming the bad debt too early is the most common error we have come across.
5. Misuse adjustment columns in the VAT return.
A lot of us mistakenly know the purpose of the adjustment column in the VAT returns and use it to correct errors from previous VAT returns that have been submitted. The purpose of the adjustment column is for bad debts (mostly). This could lead to a lot of questioning of supporting documents during the audit phase, which could lead to penalties.
The highest number of penalties occur due to late registration and deregistration since most of the clients fail to comply with the necessary threshold.
The initial step to save yourself from these penalties is making sure that your bookkeeping is adequately maintained and clear. Making up to date records will avoid many mistakes and make the completion of your records much more accessible.
Everyone has a very complex set of rules and regulations to apply to each type of supply. The VAT rates can also refer to seemingly similar transactions differently.
Poorly planned VAT, hiring a non-professional resource, issuing valid tax invoices, and mistakes in calculating the VAT and failing to file appropriate amounts are the other common mistakes made by many clients in the UAE while filing a tax return. And as a result, these mistakes can attract fines as high as Dh 50,000.
Keeping all of the above in mind, it is highly recommended that you outsource your VAT Compliance function to an FTA-Approved, Registered Tax Agents that will ensure the accurate operation of VAT and will also make sure that all compliance obligations are fulfilled.
There are many rules and regulations regarding VAT in the UAE. It can be relatively easy for businesses to make honest VAT Errors, which can lead to significant VAT Penalties or VAT Enquiries.
We understand that handling VAT along with your business is difficult, This is why we, AM Audit, with our set of the specialist in VAT take the full charge of all your VAT issues. We operate VAT in a tightly-controlled environment. Our experts are trained and aware of the changes in practice and legislation; we can play a vital role in reducing the risk of errors in the VAT Compliance process. We make sure that there are zero errors.
All you have to do is appoint us as your VAT Agent. What next? That’s it!
We are here to help guide your business through the complex maze of VAT legislation. We help you with all the areas of VAT from relatively fundamental issues like the initial registration, the completion, and submission of VAT returns, and pieces of advice to more complex problems like assessments, control visits and cross border transactions.
Why Choose AM Audit as Your Tax Agency:
- We will every time act on behalf and legally represent your company before the Federal Tax Authority of UAE.
- We will assist you with all the operations with the FTA and will also provide the necessary document in Arabic during the VAT Audit held by FTA.
- Complying with all the FTA laws and regulations, we will render you with the right advice to avoid unpredictable penalties by the FTA.
- We will follow up with the FTA and ensure your timely VAT refund (if any) and other tax matters professionally and smoothly.
You can also choose from the following services:
- VAT Registration & Deregistration
- VAT Implementation & Compliance
- VAT Return Filling
- VAT Advisory
- VAT Training
- VAT Documentation
- VAT Tax Agent
- UAE Nationals VAT Refund
- Tax Residency Certificate
- VAT Health Check
- VAT Voluntary Disclosure Filing
- VAT Refund Application
- VAT Penalty Reconsideration Application
