Common Challenges and Pitfalls in VAT Registration in the UAE

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The Federal Tax Authority states that if a company’s taxable imports and supplies surpass the statutory registration threshold of AED 375,000, it must register for VAT. Non-compliance will result in fines and penalties. You can also register voluntarily if your annual taxable turnover exceeds AED 187,500. In the United Arab Emirates (UAE), registering for value-added tax (VAT) can be difficult, and firms frequently encounter difficulties and traps along the road.

This article will help you understand the challenges and pitfalls of registering your company for VAT. VAT registration UAE has a team of tax experts in the UAE who can save you from falling into these pitfalls and face the challenges associated with VAT registration smoothly.

Let us discuss the common challenges and pitfalls in VAT registration UAE

Common challenges in VAT registration UAE

The VAT registration process is complicated, especially if you are a newbie. Companies that still need to maintain their tax records and accounts may find registering themselves for VAT difficult. Some of the common challenges that businesses face during VAT registration are-

Lack of proper accounting systems: Before VAT was introduced in 2018, many small businesses in the UAE needed to maintain their accounts and bookkeeping in place. This results in an issue when they want to register themselves for VAT. A lack of proper accounting systems leads to inaccurate figures in deciding the business turnover and, hence, confusion.
Lack of professional knowledge of the subject: Since VAT is a new concept overall, there might be some conditions where the business owner or the accountant may need clarification on the applicable rate. There might be a situation when they need help understanding what documents and records need to be presented to the Federal Tax Authority. Therefore, tax consultants in the UAE are in demand. It is always good to seek help from them whenever a doubt arises.
How much VAT is applied on a particular goods or service: This is the common confusion. The goods and services in the UAE are divided into 3 categories: standard-rated, zero-rated and exempt. The business owner and the accounting team must understand the actual category of the taxable supply so that miscalculations do not happen.

Considering the above points, challenges are faced by the business when it comes to registering for VAT and calculating the VAT on the goods and services. It is always a good idea to consult tax professionals in the UAE for proper guidance and clarity on VAT-related issues.

Pitfalls/mistakes in VAT registration in the UAE

Now, after discussing the challenges businesses face in registering for VAT. These errors and mistakes lead to a hefty fine and hence cause a total loss of money for your business. Therefore, you must ensure that you must not do these mistakes in your business.

Let us discuss some common mistakes and pitfalls for businesses in the UAE.

Not registering in time. Businesses that reach the registration threshold must register for VAT within 30 days of doing so to avoid penalties. It is also important to calculate the turnover correctly and frequently to avoid late penalties.
Not maintaining the appropriate records. Businesses must submit specific paperwork to the Federal Tax Authority (FTA) to register for VAT, including a copy of their trading license, a list of their fixed premises, and a financial statement. The registration process may take longer if the appropriate documents have been missing.
Making errors on the registration form- Businesses should carefully check the VAT registration application before submitting it because it is complicated. Application errors may cause the registration process to take longer than expected or even cause the rejection of the application. Businesses must comprehend the intricate VAT regulations in the UAE to adhere to the law. Inaccuracies in VAT computations and files might result in fines if the laws need to be understood.
Not maintaining accurate records- Companies must keep accurate records of their VAT transactions. At least five years should pass before destroying these documents. Failure to keep accurate records might make it challenging to comply with VAT regulations, as VAT regulations may get violated if records are not maintained properly.
Making late VAT returns- Businesses must submit their VAT returns every three months. Penalties may apply if returns get delayed, and filing gets delayed.
Improper VAT computation- Businesses must compute VAT accurately on every taxable supply. Calculation errors and wrong categorization of the goods and services could incur penalties.
Not requesting a VAT refund- Businesses that qualify for VAT refunds should apply for them right away. Loss of money may result from failure to file refund claims.

Businesses should carefully assess their VAT requirements and seek expert guidance from a tax advisor to avoid these difficulties and hazards.

Here are some extra pointers for companies filing for VAT in the United Arab Emirates. You can follow these tips to make your company VAT-compliant and have an error-free tax system in place for your company.

Get registered as soon as possible.
Hire a tax advisor to assist you.
Review the registration-related paperwork very carefully.
Before submitting your application, verify it again.
Recognize the VAT laws and rules.
Keep accurate records.
Put in your VAT returns on time.
Verify your VAT calculations.
Request VAT refunds right away.

By heeding these recommendations, businesses can stay compliant with the law and avoid the typical difficulties and dangers of VAT registration in the UAE. It is also advisable to seek the help of tax consultants in the UAE who can help you get things sorted at the correct time.

What VAT registration in UAE can do for you?

VAT Registration UAE is a tax firm in the UAE. We have a team of tax professionals who can help you get your business registered for VAT easily without committing any mistakes. Just communicate your issues to our experts today, and they will guide you the way through your VAT registration process.