VAT In Dubai,UAE
VAT was introduced across the UAE on 1st January 2018 at a standard rate of 5%. VAT will provide the UAE with a new source of income which will be continued to be utilised to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods/services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government on monthly/quarterly basis.
A business must Register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000 and 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. Likewise, a business may register voluntarily if their expenses exceed the voluntary registration threshold which provides opportunity to start-up businesses with no turnover to register for VAT. (VAT registration threshold limit is discussed in detail in another topic ‘VAT Registration Threshold Computation in UAE.’)
Mandate on Records & Books of Accounts
Federal Law on Value Added Tax mandates all businesses to document their financial transactions, business income, costs and associated VAT charges and to ensure that their financial records are accurate and up to date. All businesses in the UAE irrespective of annual turnover or threshold limit for registration need to record their financial transactions. To emphasize, Non-VAT-registered entities should maintain their financial records in any event, in case the tax authorities need to establish the authenticity of the same.
As stipulated under Executive regulations of Federal Law, the Accounting Records and Commercial Books shall comprise of:
Accounting Books that include records of:
- Payments and receipts
- Purchases and sales
- Revenues and expenditures
- Any additional records as required under 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) and all records of stock-counts related to Inventory statements.
In addition to the records mentioned above the Authority may require any other information in order to confirm any liability to register for Tax purposes. Businesses may be required to make changes to their core operations, financial management practices, the procedures they use to keep accounting books and records, and the technology they use in their accounting practices, in addition to changes in their human resources (accountants, tax advisers, etc.)
Record keeping Stipulations in VAT Law
As per Article (78) the Taxable Person shall keep the following records for VAT compliance:
- Records of all supplies and Imports of Goods and Services.
- All Tax Invoices and alternative documents related to receiving Goods or Services.
- All Tax Credit Notes and alternative documents received.
- All Tax Invoices and alternative documents issued.
- All Tax Credit Notes and alternative documents issued.
- Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
- Records of Goods and Services purchased and for which the Input Tax was not deducted.
- Records of exported Goods and Services.
- Records of adjustments or corrections made to accounts or Tax Invoices.
- 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.
- 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.
Record Keeping Norms and Time Frame
As per law the following conditions to be met while maintaining Accounting Records and Commercial Books:
- All the original documents in support of the accounting records and commercial books to be retained.
- If not, the information contained in the original documents to be preserved as stipulated
- The information should be retained or stored in either photocopy or electronic form, facilitating submission within reasonable time if requested by the Authority.
- The records shall be kept in a manner that facilitates the Authority, or an officer authorised by the Authority, to ascertain that Person’s Tax obligations
Time Frame for Taxable /Non-Taxable persons
- Taxable person shall maintain the records for a period of 5 years after the end of the Tax Period to which details relate
- Non-taxable persons shall maintain the records for a period of 5 years from the end of the calendar year in which the concerned document was created
At the discretion of the authority, the time period for maintained records can be prolonged.
Taxable persons/entities are mandated by the tax law to retain the records relating to capital assets for at least ten 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.
It is apparent that violations and non-compliance under VAT will attract strict measures in UAE. Entities and Individuals should ensure that the violations of Law are avoided in order to avoid the huge penalties in case of non-compliance.
The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals. As per the new regulations, if the person fails to keep required records and other information specified in the laws will be fined Dh10,000 in the first instance and Dh50,000 in case of repetition.
The law further states that if the person fails to submit data, records and documents related to tax in Arabic to authority when requested, he would be penalised Dh20,000.
How outsourced bookkeeping helps the business owners.
Business owners are always looking for ways that can help them to grow and expand their business to its full potential. Outsourcing their important services is one of the methods that they depend. Bookkeeping services are one of the most vital services which are rapidly outsourced by businesses as even simple mistakes can lead to serious repercussions. Outsourced bookkeeping service in Dubai can bring you the following assured benefits to your business: –
- Improves efficiency
- Streamline and productivity
- Cost effective
- Advanced technology
- Concentration on core activities
- No additional requirement and expense to hire accountants
- Maintains Confidentiality
- Professional service at lower cost
- Eradicate Training cost and Training difficulty of new accountants
- Advantage of additional services
- On call availability of experts
Importance of Accounting & Bookkeeping services In Dubai
As per the UAE Commercial Company Law 2015and the UAE VAT Law, it is mandatory for a company registered in the UAE to keep proper books of account for a minimum of five years.
To keep the pace along with the growing economy of the country and to comply with the legal requirements and to compete with other businesses, it is sometimes difficult for a company to manage the accounting activities of their businesses within the company, especially for SMEs. Hence, Accounting Outsourcing Services could be the best option for them to choose.
Bookkeeping services are important because:
- It helps you budget which creates a financial roadmap for your business
- It helps you file tax return every year
- It is the organization of your financial information regarding your business, accessible at any time
- It helps management to analyse business performance
- It helps with good Decision Making
- It helps with planning for strategic purposes
- It helps with easy reporting to Investors
- It helps you to take control of your business finances
- Proper bookkeeping brings you peace of mind
- It helps you track profit and growth
- It improves the Cash Flow as it ensures your customer invoices are being paid on time.
The Role of Kam in Record Keeping
The business entities in UAE is facing a number of issues while applying VAT in the business. VAT filing may become a nightmare, as a wrong entry or submission may cause a lot of trouble that leads to hefty fines, loss of reputation and mental agony.
Kam provides highly qualified and experienced chartered accountants as tax advisers who have relevant industry specific experience in taxation complying with UAE Laws to prepare books of accounts and to meet the VAT filing requirements for your business. We are committed to provide the best VAT Advisory Services in the UAE to the clients in compliance with the rules and regulations of the FTA. Kam experts can provide you with ample advice on closing of books of accounts timely and properly in anticipation to any future tax audit by the authority, and file the tax return on time.
Kam also offers a wide range of business services that include CFO Services, Auditing Services, Accounting & Bookkeeping Services, Accounting Software services, Due Diligence Services, and Tax Filing & VAT Consultancy Services
Feel free to contact us if you have any enquiries regarding your firm’s VAT related issues or about your current business.
Kam expert will give you one-hour Free Consultation to clear your doubts properly!