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Tax Consultants & Bookkeepers in the UAE

Is your business ready for VAT?

According to Federal Decree-Law no. (8) of 2017, Value Added Tax (VAT) is applicable from 1st January 2018 in the U.A.E. 

Contact Finance Works and get your business VAT ready to ensure proper compliance and avoid penalties

Books of Accounts and Record Keeping

As per Decree-Law, all businesses in the UAE need to record their financial transactions and ensure that their financial records are accurate and up to date. The final responsibility and accountability to comply with VAT is on the business.

Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case the authorities need to establish whether they should be registered.

Accounting Records and Commercial Books

As per Executive Regulations of Federal Law No. (7) on Tax procedures, Accounting Records and Commercial Books shall include the following:

  • Accounting books in relation to that Business, which include records of payments and receipts, purchases and sales, revenues and expenditures, and any business, and any matters as required under any Tax Law or any other applicable law, including:
    • Balance sheet and profit and loss accounts.
    • Records of wages and salaries.
    • Records of fixed assets.
    • Inventory records and statements (including quantities and values) at the end of any relevant Tax Period and all records of stock-counts related to Inventory statements.

In addition, the Authority may require any other information in order to confirm, through an audit trail, the Person’s Tax obligations, including any liability to register for Tax purposes.

Record-keeping

As per Decree-Law, Taxable Person shall keep the following records:

  1. Records of all supplies and Imports of Goods and Services.
  2. All Tax Invoices and alternative documents related to receiving Goods or Services.
  3. All Tax Credit Notes and alternative documents received.
  4. All Tax Invoices and alternative documents issued.
  5. All Tax Credit Notes and alternative documents issued.
  6. Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
  7. Records of Goods and Services purchased and for which the Input Tax was not deducted.
  8. Records of exported Goods and Services.
  9. Records of adjustments or corrections made to accounts or Tax Invoices.
  10. Records of any Taxable Supplies made or received in accordance with Clause (3) of Article 48 of this Decree-Law, including any declarations provided or received in respect of those Taxable Supplies.
  11. A Tax Record that includes the following information:
    • Due Tax on Taxable Supplies.
    • Due Tax on Taxable Supplies pursuant to the mechanism in Clause (1) of Article (48) of this Decree-Law.
    • Due Tax after the error correction or adjustment.
    • Recoverable Tax for supplies or Imports.
    • Recoverable Tax after the error correction or adjustment.

Retention of Records

Businesses are required to keep original transactional records for imports, exports, sales and purchases of goods and services for 5 years. 

Any records related to a real estate required to be kept shall be held for a period of 15 years after the end of the Tax Period to which they relate.

Taxable Persons are mandated by the law to retain the records relating to Capital Assets for at least ten years.

VAT Invoice

As per the Decree-Law, a registrant making a taxable or deemed supply shall issue an original Tax Invoice and deliver it to a recipient of goods or services or keep it in his records in the event of a lack of recipient.

As per the Executive Regulations, a Tax Invoice shall contain all of the following:

  • Tax Invoice clearly displayed on the invoice
  • Name, address, and Tax Registration Number of the Registrant
  • Name, address, and Tax Registration Number of the Recipient (where he is a Registrant)
  • Sequential Tax Invoice number or a unique number
  • Date of issuance and Date of supply (if different from the date the Tax Invoice)
  • Description of the Goods or Services
  • For each Good or Service, the unit price, the quantity or volume supplied, the rate of Tax and the amount payable expressed in AED.
  • Discount, if any
  • Gross amount and Tax amount payable expressed in AED

In certain instances, a simplified Tax Invoice can be issued and shall contain all of the following particulars:

  • Tax Invoice clearly displayed on the invoice
  • Name, address, and Tax Registration Number of the Registrant
  • Date of issuance
  • Description of the Goods or Services supplied
  • Total Consideration and the Tax amount charged

Click on Tax Invoice to see a FTA sample

The Executive Regulations also provides that in particular cases, a Taxable Person shall not issue separate Tax Invoices if a summary Tax Invoice in the proper format has been issued in that month.

Penalties

Penalties will be imposed for non-compliance. Examples of actions and omissions that may give raise to penalties include:

  • A person failing to register when required to do so;
  • A person failing to submit a tax return or make a payment within the required period;
  • A person failing to keep the records required under the issued tax legislation;
  • Tax evasion offences, where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

The following are the administrative penalties for violations :

  • Failure by the Taxable Person to display prices inclusive of Tax.
  • Failure by the Taxable Person to notify the Authority of applying Tax based on the margin.
  • Failure to comply with the conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone.
  • Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any Supply.
  • Failure by the Taxable Person to issue a Tax Credit Note or an alternative document.
  • Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes.

There will be further penalties decided by Courts in the case of tax evasion.

For FTA service fees and Administrative Fines click here

VAT Form 211

What is UAE VAT Voluntary Disclosure Form 211?

The FTA has introduced Form 211 – VAT Voluntary Disclosure Form to enable Taxpayers to voluntarily disclose to the FTA, any errors or omissions above the value of AED 10,000 before the Authority through a Tax audit or Assessment identifies them.

How to use the VAT Voluntary Disclosure Form 211?

If the taxable person has identified an error or omission that has been made in a previous VAT Return, the Taxpayer can make a voluntary declaration via the VAT Voluntary Disclosure Form 211. This form can be accessed by logging into the FTA website.

The taxable person can select the appropriate period for the voluntary disclosure by clicking the ‘Submit Form 211’button.

When should a Taxpayer use the VAT Voluntary Disclosure Form 211?

If a taxable person makes an error or omission or a wrong treatment of tax by which the output tax payable or input tax recoverable is more than AED 10,000/- for a particular period then, he must use the VAT Voluntary Disclosure form 211 to inform the authority. The form will show the original figures disclosed under “as reported” and will give an option to edit the amount under separate box named “as current”. Further the reason for such discrepancy also should be disclosed.

Once the newly arrived figures are provided in the “as current” box, the Total Tax Liability under box number 14 automatically gets populated. This will become the actual tax liability to be paid to the authority. In addition, the taxable person should also upload supporting documents for such voluntary disclosure including a letter describing the background of the facts, detailed description of the errors disclosed, the reason for this voluntary disclosure as well as the impact on the relevant boxes of the tax return.

Penalty while using the VAT Voluntary Disclosure Form 211?

There are two types of penalties.

  1. Fixed penalty
  2. Percentage based penalty

Fixed penalty – if the Taxpayer uses the VAT Voluntary Disclosure form 211 for the first time, AED 3,000/- shall be levied. For every repetition in using the VAT Voluntary Disclosure form 211 AED 5,000/- shall be charged.

Percentage based penalty – if the Taxpayer discloses less than the actual tax liability in the return and subsequently uses Form 211 VAT Voluntary Disclosure form, the percentage-based penalty will be as follows:

  • If the taxable person makes a voluntary disclosure before the authority notifies (by way of tax audit or tax assessment), 5% of the tax amount which was not disclosed earlier will be the penalty.
  • If the taxable person makes a voluntary disclosure after the authority notifies for a tax audit but before starting the tax audit, he has to pay 30% of the tax amount as a penalty.
  • If the authority notifies the taxable person for a tax audit and during the tax audit if he makes a voluntary disclosure by using VAT Voluntary Disclosure Form 211, he will be liable to pay 50% of the tax amount.

Mandatory VAT Registration

As per the VAT Decree-Law, a business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000 for the previous 12 month period. In addition, businesses that anticipate the value of their taxable supplies to exceed the mandatory registration threshold within the next 30 days are required to register for VAT.

As per the VAT Executive Regulations the person required to register for tax pursuant to the provisions of the Decree-Law must file a tax registration application with the authority within 30 days of being required to register. 

VOLUNTARY VAT REGISTRATION

As per the VAT Decree-Law, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.

Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

Documents required for VAT Registration

The key documentary requirements for VAT registration are as follows:

a. Trade license
b. Certificate of incorporation
c. Emirates ID
d. Articles of Association
e. Details of Bank Account in the UAE
f. Description of business activities
g. Last 12 months turnover
h. Projected future turnover
i. Expected values of imports and exports
j. Expecting any GCC supplies
k. Details of Customs Authority Registration

Please note that these may vary by the type of company and nature of business. Please contact Finance Works for more details. 

VAT GUIDANCE BY INDUSTRY

Is your supply VAT exempt?

The Decree-Law outlines that certain supplies shall be exempt from tax, namely:

  • Supply of certain financial services as specified in the Executive Regulation,
  • Supply of residential (non-zero-rated) buildings either by sale or lease,
  • Supply of bare land, and
  • Supply of local passenger transport.

Zero VAT Services

The Decree-Law outlines that the Zero rate shall apply to the following goods and services:

  • A direct on indirect Export to outside the Implementing States as specified in the Executive A direct or indirect Export to outside the Implementing States as specified in the Executive Regulation of this Decree-Law.
  • International transport of passengers and Goods which starts or ends in the State or passes through its territory, including also services related to such transport.
  • Air passenger transport in the State if it is considered an “international carriage” pursuant to Article (1) of the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929.
  • Supply of air, sea and land means of transport for the transportation of passengers and Goods as specified in the Executive Regulations of this Decree-Law.
  • Supply of Goods and Services related to the supply of the means of transport mentioned in Clause (4) of this Article and which are designed for the operation, repair, maintenance or conversion of these means of transport.
  • Supply of aircrafts or vessels designated for rescue and assistance by air or sea.
  • Supply of Goods and Services related to the transfer of Goods or passengers aboard land, air or sea means of transport pursuant to Clauses (2) and (3) of this Article, designated for consumption on board; or anything consumed by any means of transport, any installations or addition thereto or any other use during transportation.
  • The supply or Import of investment precious metals. The Executive Regulation of this DecreeLaw shall specify the precious metals and the standards based on which they are classified as being for investment purposes.
  • The first supply of residential buildings within (3) years of its completion, either through sale or lease in whole or in part, according to the controls specified in the Executive Regulation of this Decree-Law .
  • The first supply of buildings specifically designed to be used by Charities through sale or lease according to the controls specified in the Executive Regulation of this Decree-Law.  
  • The first supply of buildings converted from non-residential to residential through sale or lease according to the conditions specified in the Executive Regulation of this Decree-Law.   
  • The supply of crude oil and natural gas.
  • The supply of educational services and related Goods and Services for nurseries, preschool, elementary education, and higher educational institutions owned or funded by Federal or local Government, as specified in the Executive Regulation of this Decree-Law.
  • The supply of preventive and basic healthcare Services and related Goods and Services according to what is specified in the Executive Regulation of this Decree-Law. 

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