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VAT in the UAE – Importance of Accounting and Book-Keeping

The arrival of 2018 saw the onset of the VAT era in the UAE. This phenomenon has given rise to mixed reactions among the residents and businesses in the UAE.

Consumers feel that their buying habits have altered and that they have cut down the spending on luxury items. It can be observed that they are following strict and rigid budgets for shopping. While consumer confidence remains a bit low, the government is positive on the note that the economy will eventually pick up and thus, this deficit will get substituted.

Let’s have a refresh on the basic VAT requirements, Guidelines, and the Action Plan for the new companies that are going to implement VAT in the UAE from 2019.

What are the basic requirements of VAT

So, for a business establishment in the UAE, let us now take a look at some of the basic requirements of VAT:

  • If the annual turnover of the company is over AED 375,000/, then it is mandatory to be registered under VAT for the company
  • If the annual turnover of the company falls between AED 187,500 & AED 375,000/, then it voluntary on the company’s part to get registered under VAT for the company.
  • If the company in question is a start-up, it needs to be registered under VAT if the VAT attracted expenses are over AED 187,500/.

What are the VAT Guidelines in the UAE?

Further, organizations will have to comply with the following VAT guidelines:

  1. During the purchase of goods or availing services, the business has to ensure that tax is properly charged (if it belongs to the taxable category) by the supplier and details are provided in the invoice.
  2. At the time of sale or provision of services – Apply the tax rates on the sale value and reduce the VAT to arrive at the amount to be paid.
  3. Make the VAT payment of tax computed and deposit the due amount within the stipulated date to the Government.
  4. Maintain relevant records such as tax invoices, stock details, accounts, VAT returns to justify the tax paid at the time of a sale.

Compliance with these requirements ensures that the tax filing system is in place and all transactions are recorded and tracked efficiently.

Subsequently, the organization must also ensure proper management of the following:

  • All records and invoices
  • Filing system
  • Modifications/up-gradation of software to VAT Complaint
  • Due date of collection, payment, and remittance of tax
  • Filing of VAT returns to govt etc.

The accountant has to see to it that all the above items are in place. He/she must also gather awareness about the updated company laws as specified by the Government of UAE.

At any point of time, the organization should be able to produce proof or valid records for all VAT transactional details. In case of failure to produce the same may lead to a hefty fine charged by the Government authorities.

For assistance on all of your VAT and Accounting requirements kindly drop your queries on Aurion Business Consultants Enquiry

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