VAT Return and Compliance Service

Requirement of filing tax return – overview

Every entity registered under VAT has to file a tax return at specified intervals which is either monthly or quarterly as specified in the VAT Registration certificate. Generally, monthly returns are required for entities with annual turnover of more than AED 150 million. However, it is advisable to confirm the period specified in registration certificate to avoid noncompliance.

The return is filed through E-portal of FTA (Federal Tax Authority of the United Arab Emirates). The last day to file a VAT return is the 28th day of the month following the end of the specified VAT return period. For instance, if you are filing a quarterly VAT return for the quarter from April to June, then the 28th of July would be the deadline. If the deadline for VAT return and the payment falls on a weekend or a national holiday, the deadline for filing the VAT return or making a payment extends to the first business day right after the holiday.

In case of no transactions, ‘NIL’ tax return is required to be filed by the taxable person.

Contents of return

A taxable person is required to submit a tax return in the UAE in the format prescribed by the FTA. Currently, Form 201 is used for tax return filing. Form needs to be file online on the poral of FTA. Taxable person/agent needs to log into the portal using the credentials to file return.

There are two sections in present format of VAT return. The first section is the main section which requires details like TRN and other details of the taxpayer, VAT return period, details of sales, purchases, output VAT, Input VAT recoverable and net VAT due. The second section is the additional reporting requirements section which applies only to certain businesses under specific conditions. This section comprises fields pertaining to the profit margin scheme, stock transfers and VAT paid in other implementing states.

Calculation of VAT liability

VAT registered Taxable person is required to charge VAT @ 5% on all supplies unless they are zero rated supplies or exempted. VAT collected from customers is considered output VAT liability. When taxable person procures any goods or services, they also pay VAT to the supplier. This VAT is recoverable in form of input VAT. Taxable person needs to pay net difference as liability of the tax period.

In order to compute the liability properly, it is essential to keep track of the output tax payable and input tax recoverable. It helps taxable person in discharging the liability in compliance with VAT law and avoid any unnecessary Cashflow in form of excess tax payment and penalty due noncompliance.

Penalty of non-compliance

1. If the taxable person fails to submit the VAT return within the specified timeframe, then he must pay a penalty of AED 1000 for the first time and double fine i.e. AED 2000 in case of a repeated failure within 24 months.

2. If the taxable person fails to pay the tax payable as per the VAT return or Tax Assessment within the timeframe, then,

a.     2% of the unpaid tax

b.     4% of the unpaid tax per month if one month has passed after due date.

Subject to cap of 300%

3. Fixed penalty due to incorrect tax return is AED 1000 for the first time and AED 2000 in case of a repeated failure.

4. Where additional VAT liabilities arise from a voluntary disclosure or a tax assessment, then

a.     If paid within 20 days following the submission of a voluntary disclosure or receipt of a Tax Assessment – Nil

b.     If not paid within 20 days – 2% of unpaid tax

c.     If not paid within 1 month of expiry of 20 days - 4% of unpaid tax per month

Subject to cap of 300%

5. Variable penalty where a voluntary disclosure is submitted before the taxpayer is notified of an audit by the FTA

6. Variable penalty where a voluntary disclosure is submitted/tax assessment is received after the taxpayer is notified of an audit by the FTA

i.  50% of the underpaid tax along with

ii.  4% of the underpaid tax per month from the due date of the VAT return or in case of unjust VAT refund, date of the tax refund from FTA

How can we help

1. Help in determining classification of goods or service provided by business to determine applicability of VAT.

2. Assisting in computation of Accurate Output VAT liability to be discharged

3. Assisting in determining Input VAT recoverable by business from products/services taken by it.

4. Assist you in filing accurate VAT returns in timely manner.

5. Assisting in maintaining the required documents, keeping records, and reviewing transactions to ensure all transactions are properly reported.

6. Assist you in FTA audit by helping in producing documents, records, data and information demanded by FTA