It is a mandate from the government that VAT returns should be filed every quarter or as advised by the Federal Tax Authority (FTA) depending on the nature of the business. The failure of doing so will have a business face an administrative fine of AED 1,000 on the first time and AED 2,000 if repeated within 24 months as per Cabinet Decision No. 40 of 2017.
VAT Return is an important document as it has the recorded tax paid by consumers for a period of time. This is proof of tax-registered businesses that they have followed the mandate of paying the due amount of tax to the government.
The tax system implemented in the UAE will work best when VAT returns are filed on time and properly. It is a way of maintaining the credibility of the system by ensuring that tax liability is managed and paid.
It is a formal way of reporting to the FTA with regard to the total tax that is collected by businesses. These VAT returns also represent the transactions recorded in the financial statements. This document can also be used in auditing and other activities that are established from the VAT laws. With these returns, there is evidence that VAT obligations in the country are fulfilled.
Filing of VAT returns will be done through the FTA’s online portal. The VAT return forms are available on the website as well for legal persons of businesses to fill out. Details will be consolidated already to make it easier for them to record the amount of tax that they have accounted for in the recent period. It will also show the total purchases, total sales, input VAT, output VAT, and tax payable.
The full steps are listed below in the infographics for a visual explanation.