Top Mistakes to Avoid When Filing Tax and Return Filing in UAE

 

 

Tax and return filing in UAE is one of the most critical responsibilities, especially for businesses. It can become complex and challenging. In 2018, the UAE government introduced VAT, which is a compliance several companies are struggling to comply with. As a result, several people in the business world have been making error, which has led to errors in the audits and caused financial strain.

Here is a detailed guide to understand the commonly made errors and how businesses can avoid them to ensure a smooth VAT filing.

1.      The most basic mistake one makes when filing tax or returns is failing to register their VAT. It is also possible that they remember to file the VAT but do so incorrectly. If your business has a turnover of over AED 375,000, you need to have a VAT and add it while filing. In case you don’t do so, you will attract penalties. You can avoid this mistake and save yourself from these penalties. The first part of avoiding this mistake is to continuously check the turnover. This will help you ensure you register the VAT on time and meet the threshold rules. You should ideally track the turnover so that you don’t miss on the deadline. Lastly, make sure you voluntarily register for this VAT as soon as you reach AED 187500.

2.      The second mistake you make regarding filing of taxes during business setup in Dubai is erroneous VAT calculation. This is a common issue that can cause over or under payment of taxes. The mistake occurs when the filer tends to incorrectly calculate the VAT rate or misclassifies the goods or services. It also occurs when the user records taxable or non-taxable transactions. To avoid this mistake, you must double check the VAT when calculating it and filing the returns. You can also minimize the errors by using a software that offers to calculate VAT compliances. Applying correct VAT and classifying the goods and services according to the defined standards. When you train your financial team on VAT rules regularly and keep them updated, you can reduce these errors.

3.      Another common tax and return filing in UAE mistake is to apply VAT taxes on expenses that aren’t eligible for the same. For instance, VAT cannot be applied to personal expenses, entertainment and similar items. If you do that, it can cause discrepancies in the filing. You can avoid this mistake by reviewing the list of expenses and finding the items that are eligible for VAT recovery. You must ensure you read the rules outlined by Federal Tax Authority (FTA). When you keep clean and clear records of all your business purchases, and VAT invoices in sync with FTA requirements, you will ensure adding valid VAT invoices.

4.      The next common mistake is a failure to submit the returns on time. If you submit the VAT returns late, and frequently, it can cause major issues. The reason for this delay could be improper planning and inadequate record management. When you file the VAT late, it can lead to penalties and red flags with the tax authorities. To avoid this mistake when you opt for business setup in Dubai, you must mark the dates for VAT submission. This advance reminder can help you stay on track and be at the top of your deadlines.