UAE VAT is the only major tax that the United Arab Emirates has. VAT, or value-added tax, is a very popular form of tax type which is used in many countries.
This article is all about how to file returns for UAE VAT. The UAE government has special provisions, under which UAE VAT returns can be filed and businesses can save a lot of money.
So let’s get started with what UAE VAT is all about, and how to file returns for it.
What Is UAE VAT?
We have talked about UAE VAT in its entirety in our comprehensive guide on UAE VAT. It is recommended that you check our first if you’re unaware of the legalities surrounding UAE VAT.
Value Added Tax, often called VAT, is like an undercover tax that sneaks into most of the things you buy.
Here’s the lowdown on how VAT plays the money game.
You, the customer, ultimately foot the bill, but businesses play middlemen by collecting and sending that tax money to the government. So, businesses are like tax superheroes for the government.
These businesses not only pay what they collect but can sometimes get a tax refund from the government for what they pay to their suppliers. So, it’s all about the “value add” as it moves through the supply chain. To make it crystal clear, check out this simple example (assuming a 5% VAT in UAE rate):
What Is Value Added Tax (VAT) In The UAE?
(source: Ministry of Finance, UAE)
What Is VAT Return In UAE?
In simple terms, a tax return is like a report that lists all the stuff you bought and sold during a specific period for tax purposes.
It covers things like the stuff you imported, exported, or didn’t have to pay tax on, and it also shows how much tax you paid or collected on those transactions. To create this report, you use your invoices and send them through the FTA e-portal, which is like an online tax platform.
Now, if you’re a registered taxpayer in the UAE, you’ve got to make one of these tax reports for each tax period. That period could be a whole month or three months, depending on what the FTA says in your VAT certificate.
So, it’s a routine task for businesses in the UAE to keep track of their financial activities and report them to the tax authorities.
What Are The Filing Dates?
When it comes to submitting your VAT returns, whether you do it every month or every quarter, you’ve got to do it by the 28th day of the month after the end of that VAT period.
So, for example, if you’re dealing with a quarterly VAT return for February to April, you need to file it by May 28th.
One important thing to remember is that the first VAT period for a business in 2018 can differ depending on instructions from the tax authority. If your first period is from January 1st to January 31st, 2018, you should file your VAT return by February 28, 2018, or the next business day if February 28th is a weekend or a holiday.
In some cases, a business’s first VAT period can be longer than three months. For instance, if your first period is from January 1st to April 30th, 2018, you’d need to file your VAT return by May 28, 2018, or the next business day if May 28th is on a weekend or a holiday.
Detailed UAE VAT Return Filing Process
The VAT Return form you need to complete and submit is called ‘VAT 201.’ This form is split into 7 main sections, and here’s what they cover:
- Your details as a taxpayer.
- The specific period for your VAT Return.
- How much VAT do you collect from sales and other sources?
- How much VAT do you pay for expenses and other inputs?
- The net amount of VAT you owe or are owed.
- Any extra information you need to report?
- Your declaration and authorized signature.
In each of these sections, there are various boxes where you’ll need to provide the necessary information to finish your VAT Tax return filing. We’ll go over each of these sections and what you need to fill in the relevant boxes of VAT Return Form 201 in the following discussion.
Step-by-Step UAE VAT Filing Procedure Using VAT Return Form 201
If you want to fill out your VAT Return Form 201, just hop onto the FTA e-Services portal with your username and password. Once you’re in, go to the Form Navigation menu, select ‘VAT,’ then click on ‘VAT 201 – VAT Return,’ and finally hit ‘VAT 201 – New VAT Return’ to start the process of filing your VAT return.
When you click on ‘VAT 201 – New VAT Return’ as you see in the picture above, different parts of the VAT return form will pop up. Now, let’s go through how to file your VAT Tax return step by step and talk about what details you need to provide in each of these sections.
Details of the taxable individual
In the section above, we’re going to grab some important info from taxpayers, like their “TRN” (Tax Registration Number), name, and address. It’ll fill in automatically.
If a tax agent is doing the VAT return for a taxpayer, we’ll also put in the agent’s “TAAN” (Tax Agent Approval Number), the related “TAN” (Tax Agency Number), and the names of the agent and their agency right at the top of the VAT Return form.
Understanding the Significance of Tax Year-End and UAE VAT Returns
The information in the previous section, including the VAT return period you’re currently reporting for, the end of the tax year, the reference number for your VAT return period, and the due date for your VAT return, will be automatically filled in for you.
The tax year end is important for businesses that can’t reclaim all of their input VAT and need to make an annual adjustment for their input tax. You can only make this adjustment in the first return after the tax year ends. The VAT return period reference number tells you which VAT return period falls within that tax year.
If your VAT return period reference is 1, businesses affected by this rule should include their input tax adjustment in that VAT return. But don’t stress about it right now, because this rule applies after the first year of VAT returns, starting from January 1, 2019.
VAT on sales in the UAE
In the part just mentioned, you should provide information about things like regular taxable stuff in the Emirates, tax-free stuff, things that don’t get taxed, and stuff where the tax is paid by the buyer.
It’s all about different types of supplies and their details.
What to Include in Your UAE VAT Report
UAE VAT on expenses and all other inputs
In this section, make sure to provide information about the stuff you bought or the money you spent, which had a 5% VAT, and the supplies which you pay the tax later. Also, include any recoverable tax that you can get back.
Understanding Your VAT Payment and Refund
In simpler terms, this section is all about your UAE VAT, the tax you pay on goods and services. Here’s the breakdown:
- Box 12 – Total Due Tax: This shows the total VAT you need to pay for this tax return period. It’s based on what you’ve earned from sales and other outputs. So, it’s the sum of the VAT you’ve charged on your sales.
- Box 13 – Total Recoverable Tax: This is the VAT you can get back. It’s based on what you’ve spent on expenses and other inputs. Think of it as the VAT you’ve paid on stuff you needed for your business.
- Box 14 – Payable Tax: This is the key number. It’s the difference between what you owe (Box 12) and what you can get back (Box 13). If Box 12 is bigger, you owe that extra amount. If Box 13 is larger, you can either get a refund or use it in the next tax period.
So, in a nutshell, if you make more in VAT than you spend (Box 12 > Box 13), you pay the extra. But if you spend more (Box 12 < Box 13), you can either get a refund or save it for later.
Profit Margin Scheme Reporting for Eligible Businesses
Additional reporting requirements in UAE VAT
Only businesses that have used the Profit Margin Scheme during this time need to pay attention to this part. If you haven’t used it, simply check ‘No’ and move on to the next section. This is just an extra bit of info you’re sharing, and it won’t affect your VAT Return financially.
The final step towards filing UAE VAT returns
Declaration and authorized signatory
In the section above, make sure to enter the details of the person authorized to sign, and then check the box in the declaration section to send in your VAT Return. You also have the option to save your progress as a draft if you’re not ready to submit it right away.
But here’s the important part: Before you hit that submit button, be sure to double-check all the information.
Only when you’re 100% confident that everything is correct should you click the submit button. Once your VAT Return is successfully filed, you’ll get an email from FTA confirming that they’ve received it.
Note that you can file UAE VAT in its entirety by logging on to the EMARATAX portal and following the detailed instructions we have provided you. The process is pretty straightforward and does not require any accountant assistance.
EMARATAX portal login page
However, it is still recommended that you consult a professional before you take any steps towards finances, especially related to tax.
You should also refer to the official UAE VAT return filing guide by the UAE’s Federal Tax Authority, or even the UAE Government Portal’s detailed video guides will work wonders in clearing your doubts regarding UAE VAT return filing.
UAE Federal Tax Authority Infographic on VAT return-filing
Conclusion
When it comes to filing your UAE VAT returns, you need to provide a summary of your sales, purchases, output VAT, and input VAT.
This summary should follow the format set by the Federal Tax Authority (FTA). However, it’s not just about putting all your sales and expenses together. Some parts require you to give more detailed information, especially if you’re eligible to recover input VAT.
For instance, if you have standard-rated sales at the Emirates level, you should only report the expenses or purchases for which you can recover input VAT. Trying to collect and organize all this information manually can be tough, and it might cause you to miss deadlines, which leads to non-compliance.
That’s why businesses must use the right tax accounting software such as ProfitBooks. This software not only helps you keep track of your UAE VAT transactions but also makes it easy to create the correct UAE VAT Return in the required format.
With the right software, you can do this with minimal effort and avoid hefty penalties, which can range from AED 1,000 to 3,000 for not filing or filing incorrectly.
In the world of compliance, having good tax accounting software is essential for businesses. You need to choose software that will make the transition to the new VAT rules smooth, simplify your VAT accounting, and streamline the process of filing returns.
ProfitBooks is exactly the right tool for this. The best part? It’s a FREE-to-use accounting software with customer support that answers within the same business day!
Get your FREE account now!
Also Read:
