Submission and Calculation of VAT returns

Submission and Calculation of VAT returns
by Aswani

Submission and Calculation of VAT returns in Abu Dhabi

Managing VAT compliance can be a complex task, especially for businesses unfamiliar with the UAE’s tax system.  Calculating VAT, consolidating taxable supplies and exports, and filing accurate returns within the specific format required by the Federal Tax Authority (FTA) can be time-consuming and prone to errors.

HLB Abu Dhabi can help!  Our experienced VAT consultants, all approved by the FTA, offer comprehensive VAT return filing services to businesses of all sizes in Abu Dhabi. This frees up your valuable resources and ensures your VAT obligations are handled efficiently and accurately.

Significance of VAT Return Filing

For businesses registered for Value Added Tax (VAT) in the UAE, filing VAT returns is a mandatory obligation.  These returns, submitted to the Federal Tax Authority (FTA) before the designated deadline, serve several crucial purposes:

  • Compliance and Transparency: VAT returns provide the FTA with a clear picture of your business activities, ensuring you meet your tax obligations. Timely and accurate filing demonstrates good business practice and strengthens your legal standing.
  • Accurate Tax Payment: VAT returns form the basis for calculating the amount of VAT your business owes to the government. Filing accurately ensures you pay the correct amount, avoiding potential penalties or interest charges for underpayment.
  • Potential Benefits: In some cases, VAT returns can be advantageous. Businesses can claim back input VAT, the VAT they paid on business purchases, by demonstrating these expenses through their VAT return filings.

In essence, filing VAT returns is not just a legal requirement; it’s a vital part of maintaining good tax health for your business in the Abu dhabi.

Submission of VAT Returns Procedure

Filing your VAT return in the UAE involves a series of steps to ensure accuracy and timely submission:

  • Gather Required Documents:

Compile all necessary documents for the reporting period, such as invoices, receipts, and bank statements.  These documents support the taxable supplies and expenses you’ll declare in your return.

  • Prepare Your VAT Return:

Use the FTA’s approved platform (eServices portal) to complete your VAT return electronically.  The system will guide you through entering relevant details about your sales, purchases, and VAT calculations.

  • Submission and Review:

Once prepared, submit your VAT return electronically.  The FTA will then review your submission for completeness and any discrepancies.

  • Potential Follow-up:

If discrepancies are found, the FTA may contact you for clarification or request additional information.  It’s crucial to respond promptly and address any issues raised.

  • Filing Confirmation:

Upon successful review, the FTA will confirm your VAT return is filed.  You can access a copy of your submitted return for your records.

VAT Calculations in Abu Dhabi

The UAE follows a standard VAT rate of 5% on most goods and services supplied within the country. However, calculating VAT involves a few key steps:

  1. Identifying the VAT Rate:

The standard VAT rate of 5% applies to most taxable supplies. However, there are exceptions:

Zero-rated supplies: Certain goods and services like exports, educational services, and some basic necessities are exempt from VAT. No VAT is charged on these supplies.

Exempt supplies: Financial services, local passenger transport, and bare land supply are examples of exempt supplies. While VAT isn’t charged on the supply itself, any VAT incurred on related expenses may not be recoverable.

  1. Determining the VAT Amount:

For taxable supplies, use the following formula to calculate the VAT amount:

VAT Amount = Supply Price (excluding VAT) x VAT Rate (5%)

Example: If the price of a good or service is AED 100 (excluding VAT), the VAT amount would be:

VAT Amount = AED 100 x 5% = AED 5

  1. Adding VAT to the Supply Price:

To get the final price a customer pays, including VAT, simply add the calculated VAT amount to the original supply price:

Total Price = Supply Price (excluding VAT) + VAT Amount

In the example above:

Total Price = AED 100 + AED 5 = AED 105

Understanding VAT Return Penalties

Filing VAT returns and paying VAT dues on time is crucial for businesses registered for VAT in the UAE.  Failing to do so can result in significant penalties.  Here’s a breakdown of the consequences for non-compliance:

Late VAT Return Filing:

First Offense: A penalty of AED 1,000 will be imposed for the first instance of late filing.

Repeat Offenses: If you fail to file your VAT return on time within a 24-month period after the first offense, the penalty increases to AED 2,000.

Late VAT Payment:

Immediate Penalty: A penalty of 2% of the outstanding VAT amount is applied immediately after the due date for payment.

Monthly Penalty: If the VAT remains unpaid one month after the due date, an additional penalty of 4% is charged every month on the outstanding amount. This continues until the full payment is settled.

Maximum Penalty: If the VAT remains unpaid for more than one month after the due date, a maximum penalty of up to 300% can be imposed on the outstanding amount.

How can HLB Abu Dhabi support you in submitting your VAT return in Abu Dhabi?

HLB Abu Dhabi’s VAT return filing services in Abu Dhabi and the UAE are tailored to meet our clients’ specific needs. We understand your business dynamics, prioritize transparency throughout all processes, minimize your expenses, and optimize your earnings through efficient tax strategies.

HLB Abu Dhabi provides:

  • Ensuring tax compliance
  • Carrying out legal procedures
  • Guidance and assistance with VAT return filing
  • Submission of the VAT return
  • Handling communication with the Tax Authority in case of penalties
  • Error-free VAT filing supported by accurate accounting records.

How HLB Abu Dhabi Can Help?

Contact us today to discuss your specific situation and learn how we can help.

Call or Email us: +971 50 742 7124 or abudhabi@hlbhamt.com

Frequently Asked Questions (FAQ’s)

  1. How to submit a VAT return in the United Arab Emirates?

    The VAT return for the United Arab Emirates must be filed online. Registered businesses are required to prepare their VAT tax returns in the authorized format and submit them online through the FTA website.

  2. When is the deadline for filing VAT returns in the UAE?

    UAE taxpayers should submit their VAT returns to the Federal Tax Authority (FTA) regularly. Returns must be filed within 28 days from the end of the tax period, adhering to the procedures specified in the VAT regulations.

  3. What are the consequences of not filing your VAT return in the UAE?

    Failure to submit a VAT return may lead to tax assessments and regulatory penalties.

  4. Can VAT returns be filed physically?

    No, only online submission of VAT returns is permitted.

  5. Are VAT returns mandatory for every registered company in the UAE?

    Yes, all registered businesses in the UAE must file a VAT return.