Penalties and fines are an unwanted burden for your business. The general penalties under VAT in UAE are the following. Failure to keep proper records and information leads to a penalty of AED 10,000, whereas it is AED 50,000 the second time. Failure to submit accounts when demanded by the authority, register within the timeframe, and designate a legal representative leads to a penalty of AED 20,000. Failure to inform the FTA in UAE after any amendment leads to a penalty of AED 5,000, whereas it is AED 15,000 the second time.
All business entities should make their business ready for VAT audit in Dubai. VAT audit in UAE must follow a checklist before commencing audit. Documents required for VAT Audit in UAE are Records of all supplies and Imports of Goods and Services, Tax Invoices, Tax Credit Notes, exported Goods and Services, adjustments or corrections, Customs declarations, and fixed asset or capital asset purchased. The VAT audit procedure is reviewing the financial records and returns, performing them during official working hours, and reporting violations.
VAT was introduced in the UAE on the 1st of January 2018 to expand the source of revenue for the advantage of the citizens. VAT implementation in UAE has its benefits for the current business growth. VAT in UAE will aid by better infrastructure with contributions to the public infrastructure, higher business efficiency with a systematic approach to business, improved liability management and check of cash flow, and boost to the government with a more stable economy.
Designated Zones in UAE recognized by the Dubai Cabinet eligible for special treatment under the UAE VAT law. A Designated Zone must be a distinct fenced area. The zone should meet the following terms like adhering to stringent control criteria, maintaining detailed accounts of goods supplied, implementing security and customs systems, following internal procedures, and adhering to the processes set out by the FTA. If a Designated Zone in Dubai transforms the way it operates, then it will be considered a part of Dubai for VAT purposes.
Related parties for VAT in Dubai are two or more people who are not separate on the economic, financial, or regulatory level. One can control the others either by law or through the purchase of shares or voting rights. Economic practices include either completing a common commercial objective, business profiting both parties, or supply to the same customers. Financial level including either financial support, dependency on another person’s business, or mutual interest in the proceeds. Regulatory practices including either the same management, employees, or shareholders.
The profit Margin scheme in UAE is where a registered person calculates and charges tax based on the profit margin scheme. The taxable person may calculate tax using the profit margin in the following situations that are goods purchased from a person who is not registered and a taxable person who calculated the tax using the profit margin scheme in UAE. It also includes the supply of goods for which no recovery of input tax. The goods subject to the profit margin scheme are second-hand tangible movable goods, antiques over 50 years old, and collector items.
The reverse charge mechanism in UAE is under which the recipient of goods or services has to pay VAT instead of the supplier. It applies to a taxable person importing goods or services for business or a registered person who makes a taxable supply in the UAE to another registered person of specified goods with applicable rules. The reverse charge under VAT law in Dubai is not applicable when the final destination of imported goods is another implementing state or when supply is taxable at 0%.
A tax agent in UAE is a person registered with the FTA. Tax Agents hired by a Taxable Person to represent and assist them in fulfilling tax obligations. The duties of a Tax Agent are to assist clients, maintain the confidentiality of information, refuse to participate in any work resulting in the breach of the law and provide all information requested by FTA. FTA specifies eligibility criteria for Tax Agents. Tax Agents in UAE have to mandatorily register with the FTA and obtain a Tax Agent license.
