VAT or Value-Added Tax is a tax paid by the consumer at the end of the supply chain. As the name states itself, it is a tax that is enforced incrementally on the price of the product or service at every stage of the supply chain when the value is added to each input to make it a perfect output for the end consumer. What’s the role of a business then if the tax is to be paid by the consumer? A business acts as a tax collector for the government.
UAE first introduced the collection of VAT in the year 2018 at a rate of 5% on most goods and services. The Federal Tax Authority (FTA) is the government body that is in charge of the collection, regulation and execution of VAT along with other federal taxes. Businesses are hence bound to follow the guidelines provided by FTA and IFRS (International Financial Reporting Standards) when filing their VAT return ensuring to do so within 28 days of the tax period (varies according to the type of business).
Why should a business pay VAT?
If a business is working with expensive machines or equipment, paying VAT might just be beneficial. As a business buys those expensive equipment, it is paying input tax on those goods. The VAT charged by that business (which is in accordance with the FTA’s set percentage) on the product sold is the output tax. Since the business’s input tax is likely to be greater than the output tax, the business can claim it at the end of every fiscal year or an adjustment could be made in the next VAT return.
However, as easy as it may sound, there are some definitive guidelines AND timelines that need to be followed when filing a VAT return, non-compliance to which can lead to severe penalties.
But what could possibly happen if a business files their VAT return late or incorrectly?
Filing a late VAT return can result in incremental penalties. The first offense for instance can cost 1000 AED, repetition in 24 months can cost another 2000 AED. Providing incorrect or incomplete documents while filing VAT returns can charge a business 5000 AED per document (missing or false). Non-compliance to other guidelines of VAT can result in severe penalties for each non-adherence. Such negligence could not only result in financial burden but also pose danger to the business’s reputation before FTA.
How can a business make sure to avoid such errors?
A business can delegate such intricate matters to reliable accounting and bookkeeping firms such as ACCBOOKS Accounting & Bookkeeping which is a registered firm in UAE specialized in accounting and VAT to serve its clients with cost-effective and effective solutions for their needs. Because of such experienced experts, VAT uncertainty is now not an option in the UAE.
With an already developed and diverse clientele from food and beverages industry to trading companies, ACCBOOKS knows how to make its clients feel valued with the help of consultancy and solutions from its team of experts in the field of VAT, accounting and auditing as well as reliable cloud services of its authorized partner ZOHO. ACCBOOKS ensures to bring its clients the best running applications and softwares for the solution of all their financial needs under one roof.
ACCBOOKS accounting services Dubai provides wide ranging services and PPT (People, Process and Technology) framework to bring unique solutions, businesses can now be assured that their VAT returns and claims are now free of any lapses and that their business’s finance is in safe hands.