01
VAT Registration
Businesses in the UAE with an annual taxable turnover exceeding AED 375,000 must register for VAT with the FTA. VAT registration is mandatory for such businesses, while companies with a taxable turnover between AED 187,500 and AED 375,000 may opt for voluntary VAT registration. Once registered, businesses receive a Tax Registration Number (TRN), which must be used in all VAT-related transactions.
02
VAT Invoicing and Record-Keeping
Businesses that are VAT-registered are obliged to issue invoices that are VAT-compliant for all supplies that are taxable. In these invoices, the following details are necessary: the company’s TRN, the VAT amount, and also the total amount that should be paid. Moreover, they must keep complete accounts of each transaction such as the sales invoice, purchase receipts, and contracts.
VAT records should be held for a minimum of five years and made available to the FTA upon request. The proper record keeping process helps efficiently VAT compliance and the facilitation of audits.
03
Zero-Rated and Exempt Supplies
Some goods and services in the UAE are classified as zero-rated or exempt from VAT. While the sale of zero-rated supplies is still subject to VAT, the rate is 0%, which means that businesses can reclaim the input VAT on their expenses. On the other side, exempt supplies do not incur VAT, and thus, businesses are unable to account for the input VAT on expenses related to exempt supplies. Classification of goods and services should be done very accurately because the stakeholders run the risk of giving incorrect information and thus, they might get penalties
05
VAT Returns Filing
VAT returns must be filed either monthly or quarterly, depending on the business’s revenue. The VAT return form provides a summary of output VAT, input VAT, zero-rated supplies, exempt supplies, and any adjustments. It is important that VAT returns are filed accurately and on time to avoid penalties.
Businesses must pay any outstanding VAT liability when filing their returns. If the input VAT exceeds the output VAT, businesses can request a refund or carry forward the excess amount to future VAT periods.
06
VAT Audits and Compliance
The FTA regularly conducts VAT audits to ensure that businesses comply with VAT regulations. A VAT audit involves a thorough review of a business’s financial records, transactions, and VAT returns. Proper VAT accounting ensures that businesses are prepared for audits and can provide all required documentation to the FTA.