Value Added Tax (VAT) is a general consumption tax introduced in the UAE on 1 January 2018 with a rate of 5%, and it applies to the majority of transactions in goods and services. Are you looking for advice on how to pay VAT in UAE? In this article, you’ll find all the necessary information on how to do it right.
Besides, businesses may choose to register for VAT voluntarily if the total value of their taxable supplies and imports (or taxable expenses) exceeds the voluntary registration threshold of AED 187,500.
Here is how it works.
- UAE imposes VAT on tax registered businesses on a taxable supply of goods or services at each step of the supply chain.
- Businesses pay the government the tax that they collect from their customers.
- At the same time, they receive a refund from the government on the tax that they have paid to their suppliers.
VAT Filing in UAE
VAT registered businesses must submit a VAT return to Federal Tax Authority (FTA) at the end of each tax period. VAT filing in UAE is done electronically through the FTA portal. The return can be submitted by the taxable person or another person who has the right to do so on the taxable person’s behalf. For example, you can hire a tax agent or an authorized representative to do it for you.
Taxable businesses must file VAT returns with FTA and pay the tax within 28 days of the end of the tax period as determined by FTA for each business. If that date falls on a public holiday or weekend, it must be submitted on the next working day after the holiday or weekend.
The standard tax period is:
- quarterly for businesses with an annual turnover below Dh150 million
- monthly for businesses with an annual turnover of Dh150 million or more.
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VAT Submission UAE
The businesses are required to file VAT return online using the Federal Tax Authority (FTA) portal. The FTA Portal is designed to accept the returns only through online mode because offline capabilities to file VAT return through XML and EXCEL are currently not available. That means that taxpayers have to manually provide the values of Sales, Purchase, Output VAT, Input VAT, etc., in the appropriate boxes of the VAT return form available on the FTA portal.
The VAT Return form is named “VAT 201”. You need to fill it and submit it online. The Form VAT 201 has seven sections:
- Taxable Person Details
- VAT Return Period
- VAT on sales and all other outputs
- VAT on expenses and all other inputs
- Net VAT Due
- Additional reporting requirements
- Declaration and Authorized Signatory
Each of these sections consists of different fields where taxpayers have to provide the details to complete the VAT Tax return filing.
Before submitting the VAT Return, you should take utmost care in verifying all the details. You should click the Submit button only when you are sure that all the information is correct. After the successful filing of the VAT Return, you will receive an e-mail from FTA confirming the VAT Return submission.
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How to Pay VAT in UAE
If the output VAT in VAT return is higher than the recoverable input VAT, the difference will result in a VAT liability, and it needs to be paid to the FTA. Registered businesses must pay their due tax to the Federal Tax Authority, using one of the following options:
- locally issued UAE bank credit card
- bank transfer
- e-Dirham card
When you make VAT payments using your e-Dirham card at the e-Service portal, you will have to pay a transaction fee of AED 3. A payment using a credit card will typically incur a charge between 2% – 3% of the total payable amount.
It is possible to make partial payments. But you should make sure you pay the entire amount before the due date because there are penalties for late filing of a return or late payment of VAT. Besides, a taxable person may be subject to a penalty if the information submitted in a VAT return is incorrect.
And remember that although tax returns must be submitted and paid electronically, you must keep accounting records and documents relating to business activities properly. That will allow the FTA to check that you have got everything right. These business records include such documents as the balance sheet, profit and loss account, payroll records, wages, fixed assets, records and inventory statements.
Learn How We Can Help in Filing VAT
Beaufort Associates offers world-class business advisory, management consulting, and VAT consultancy services for businesses in different industries in the UAE. Our experts know all the intricacies of the UAE tax laws and regulations. They can provide you with VAT compliance support and guidance to ensure that your company meets all regulatory requirements.
We will provide you with accounting advice and work with your team to prepare the VAT return. We will also facilitate the filing of the VAT return with the tax authorities after your approval. Contact us for a free initial consultation if you need reliable help to manage your business’s VAT aspects.