VAT Compliance for SMEs in the UAE: A Step-by-Step Guide

Capstone Finance

Running a Small and midsize enterprises in the UAE is a stimulating venture. But dealing with the complexities associated with the Value Added Tax (VAT) is a challenge. VAT was introduced as a peculiarity in 2018 and has, since then, become an integral part of the financial management of businesses in the Emirates. In this article, we will discuss the VAT Compliance for SMEs in the UAE which is going to be a Step-by-Step Guide.

What are the VAT Compliance requirements for SMEs in the UAE?

The key VAT compliance requirements for SMEs in the UAE are;

1.      VAT registration

SMEs in the UAE need to comply with the VAT registration processwhich can be done through the following steps;

✔     Determine Eligibility

The first step is to determine if your company’s taxable supplies exceed AED 375,000 in the past 12 months. Registration is mandatory if expected taxable supplies in the next 30 days are more than this threshold. Businesses with taxable supplies less than AED 187,500 and less than AED 375,000 can opt for voluntary registration.

✔     Gather Required Documents

The next step is to gather all essential documents including a valid trade license, proof of business activity, and identification for the SME owner and any partners. It helps to reorganize the registration process.

✔     Access the FTA Portal

Go to the Federal Tax Authority (FTA) website. This portal is a primary platform for handling VAT-related transactions if you do not already have an account, you will need to create one.

✔     Complete the Application Form

On the FTA portal, you have to fill out the VAT registration application form. To sidestep any interruptions in the process, make sure all information provided is comprehensive and correct.

✔     Submit the Application

The next step for registration is to just submit the form with all necessary documents after completing the form.

✔     Receive Your VAT Registration Number

Your application will be handled through the FTA and you will be given a VAT registration number that means you have complied. This number will be mandatory for future VAT transactions and reporting.

2.      Issuing Tax Invoices

All taxable supplies will require the issuance of tax invoices by the guidelines of the Federal Tax Authority (FTA). The supplier and the recipient should have their names, addresses, and tax registration numbers included on a valid tax invoice. In addition, the date of supply, description of the goods or services, the total value, and the VAT amount have to be mentioned in it. These tax invoices are an important document that needs to be properly issued to be able to claim input VAT and your operations would be smooth.

3.      Maintaining Records

VAT compliance necessitates accurate record-keeping. For SMEs, they have to keep all records of the VAT they have paid for at least 5 years. It includes;

  • Tax invoices
  • Invoice receipt
  • Payment confirmation
  • Records of tax paid for taxable supplies
  • Vat calculation

It gives organized records for easy retrieval during audits and VAT reporting is transparent.

4.      Filing VAT Returns

SMEs need to make regular VAT returns, usually on a quarterly or annual basis depending on the level of turnover. A return includes;

  • Detailed information on taxable supplies
  • Input and output vat
  • Adjustments as made during the tax period

FTA requires that submissions be made through the FTA portal within 28 days following the end of the tax period otherwise a penalty will be incurred.

5.      Payment of VAT

SMEs have to file the VAT return and, where VAT is due, pay by the filing deadline. There is an option to make payments online in the FTA portal or via bank transfer. It is essential to make sure timely payments are made without incurring fines and keep good status with the FTA.

6.      Calculating Input and Output VAT

SMEs have to calculate accurately the input and the output VAT to comply. Sales tax is the output VAT and the VAT that is paid on purchases is known as input VAT. Taxable businesses can reclaim input VAT if it has to do with taxable supplies. Accurate calculations help prevent discrepancies and help perfect reporting when submitting VAT return submissions.

Conclusion

Businesses must first understand VAT Compliance in the UAE. If you can understand the requirements and follow this step-by-step guide then, you can ensure a smooth and compliant experience. If SMEs face issues, it is recommended to get assistance from Farahat & Co. Their well-capable team can address all the issues timely.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *