Compliance requirements under VAT

Posted on Nov 24, 2017

Compliance requirements under VAT

The Ministry of Finance will start registering companies that are above the yearly threshold for value added tax in the second half of this year as the country gears up for implementing the 5 per cent levy from January 1, 2018.The ministry announced that businesses that provide taxable goods or services, with annual revenue of more than Dh375,000 it will mandatory for the company to register under UAE VAT before the end of the year 2017. Businesses with taxable supplies below Dh375,000 but over Dh187,500 will have the option to register, Further, if it is less than Dh 187,500, the company need not register under this law, it said. The UAE has yet to publish its VAT law but has established a Federal Tax Authority to deal with the levy. The authority will administer, collect and enforce federal taxes and will perform tax audits and administer penalties in cases of non-compliance with the tax laws. For the startups, if the VAT attracted expenses are more than AED 187,500/, (USD 50K) such companies have to be registered under the UAE VAT law.

Threshold will be calculated accordingly:

·        The total value of supplies made by a taxable person for the month in which he is applying for VAT registration and the previous eleven months

·        The total value of supplies of the subsequent 30 days on which he is applying for VAT registration

If the turnover exceeds the threshold limit company has to register for VAT keeping in mind that value of exempted supply will not be considered.

Registration for VAT

Any business/taxable person that is required to be VAT registered and charge VAT from 1 January 2018 must register for VAT purposes, in the manner specified by the Federal Tax Authority, prior to that date. The Government is intending to open VAT registrations from the third quarter of 2017 on a voluntary basis and from the final quarter of 2017 on a compulsory basis for those that choose not to register earlier.

Who is a Taxable person under GCC VAT Agreement?

Any Person/individual that conducts an Economic Activity independently for the purpose of generating income, who is registered or obligated to register for VAT in accordance with the provisions of this Agreement which include businesses located outside the GCC territory.

What is Tax Group / VAT Group?

Each Member State may treat the Tax Group as a single Taxable Person in accordance with the rules and conditions put in place for that purpose. A Tax Group means two or more Corporate Persons who are Residents of the same Member State. Such group will be treated as a single taxable person for compliance of UAE VAT law.

·        Each person has a place of establishment or a fixed establishment in the UAE.

·         The persons are “related parties” and

·         Either one person controls others, or two or more persons from the partnership control the others

VAT returns and payments are carried out by the member who acts as a representative of the VAT group however they will be jointly liable for the payments and returns. Further, one entity cannot be part of more than one VAT group.

Record Keeping

Book keeping and necessary supporting and relevant records are highly essential requirements for proper management and control of the business operations. This will facilitate the correct receipt and payment of cash and other transactions entered by the company. It is mandatory to maintain the books of accounts under UAE company law and VAT law. Hence maintenance of accounts in UAE is compulsory. It is mandatory for every taxable person to maintain books of accounts under UAE VAT law. In addition to that the authority can ask for additional documents such as, annual accounts, general ledger, purchase day book, invoices issued, invoices received, credit notes, debit notes, VAT Ledger etc.

Under Federal Law No (2), Article 26

  • Each company shall maintain appropriate accounting records showing its transactions and should disclose at any time the accurate financial position of the company. The Partners or investors ought to affirm that the books of accounts of the company are kept as per the provisions of this Law.
  • Under the UAE VAT law the books of accounts and records are to be maintained for five years from the end of the financial year of the company.
  • The company may maintain an electronic copy of the original of the documents and records kept and deposited therein in accordance with the controls issued by a Ministerial Decision.




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