VAT Compliance Audit in UAE

Consumers in UAE are expected to pay VAT on their purchase for most of the goods and services. The UAE Minister of State for Finance Affairs has stated that the UAE will implement VAT at the rate of 5% on 1st January 2018. There are some exceptions which will not fall under taxation which may include Basic Food, Medicine/Healthcare, Education, Etc. Other countries from GCC may also implement VAT by 1st January of 2018 or 1st January of 2019.

What is the reason behind the VAT implementation in UAE?

The government is providing public services to the citizens and residents such as hospitals, roads, public, schools, parks, waste control, police and defense services and much more. To meet the expenditure for its services, the government has to generate huge revenue. It can be achieved by levying taxes. UAE is the member nation of GCC, It is very closely connected through “The Economic Agreement between the GCC states” and “The GCC Customs Union”. All the member countries of GCC have worked together in designing and implementing new public policies.

Threshold for VAT registration

  1. If the annual turnover of the company is less than AED 187,500, the company need not be registered under the law.
  2. If the annual turnover of the company is between AED 187,500 and AED 375,000, it is optional to register under the UAE VAT law.
  3. It is mandatory for the company to register under the UAE VAT law if the annual turnover of the company is more than AED 375,000. Special rules will apply to the Real Estate Businesses and special rules are expected to apply to the intra-GCC trade goods.

What are the necessary steps to be taken by Businesses in UAE?

Businesses should figure out whether their goods or service are taxable. If they fall under the VAT law, they should register under the VAT registration platform before the end of 2017. They should make necessary changes on financial management and bookkeeping along with recording their financial transactions, carefully documenting their business income, costs and associated VAT charges. Make necessary changes in technology and human resource in order to prepare for VAT and also changes to be done to their accounting software. Businesses have options of either hiring VAT professionals or outsourcing the job.Any taxable person must retain VAT invoices issued and received for a minimum of 5 years. When the proper guideline and law is released by the government, businesses should clarify with the professionals whether their goods and services are taxable.

Vat Compliance Audit

Businesses in the UAE are not sure whether they had done their returns properly and a few filled their returns wrongly. After the implementation of VAT businesses should file their VAT returns either monthly or quarterly as required by the Federal Tax Authority. There should not be any mistake made while filing the returns to the authority to avoid the penalty.

At our consultancy Alliott Management Consultants our steps of doing compliance audit is simplified into

  1. Reviewing accounting / bookkeeping software.
  2. Reviewing output/input tax.
  3. Reviewing your VAT returns on a regular basis.
  4. Checking your TAX due amount.

For businesses in UAE, if you need consultation on VAT registration, filing and returns schedule an appointment with Alliott Management Consultants by clicking here or Email