As per UAE law, businesses must ensure full compliance with VAT regulations administered by the Federal Tax Authority (FTA). A health check for VAT in UAE is an essential process that helps companies assess their VAT records, tax returns, and overall compliance to avoid fines and penalties. Health check for VAT review ensures that VAT is correctly applied to transactions, payments are made on time, and exemptions or zero-rated supplies are handled accurately, safeguarding the business from costly errors and legal risks.

Health check for VAT

A VAT Health Check is a comprehensive review of your business’s VAT processes and records to ensure compliance with local VAT regulations. It’s like a medical checkup for your finances, identifying potential issues before they escalate into bigger problems.  Its importance in:

• Compliance: Ensures that your business is adhering to all relevant VAT laws and regulations, minimizing the risk of penalties and fines.
• Efficiency: Identifies opportunities to streamline VAT processes, reducing administrative burdens and saving time.
• Accuracy: Verifies the accuracy of VAT calculations and returns, preventing errors that could lead to financial losses.
• Risk Mitigation: Proactively addresses potential VAT risks, such as incorrect input tax claims or output tax calculations.
• Potential Savings: Helps identify opportunities to reclaim VAT on eligible expenses and optimize VAT strategies.

Do you have any Changes in Your License (Changes in Shareholder. etc)?

In the UAE, any changes in company structure, such as alterations in shareholders, ownership, or company directors, must be reported to the relevant authorities to maintain legal compliance. According to UAE Commercial Companies Law (Federal Law No. 2 of 2015), businesses are required to update their trade license with the Department of Economic Development (DED) whenever such changes occur. This includes filing necessary documentation and amending the Memorandum of Association (MoA) to reflect the new ownership or management structure. Failure to report these changes promptly can lead to penalties, fines, or even suspension of business activities.

Did you update your portal details?

Updating portal details, such as contact information, authorized personnel, or other business-related data, is a mandatory requirement under the guidelines of the Federal Tax Authority (FTA) and other regulations. Businesses must ensure that their registered information is accurate and current in the respective portals, as it affects communication, tax filings, and compliance. According to UAE law, any changes in the company’s structure, such as management, address, or ownership, must be updated promptly. Failure to update portal details can result in administrative penalties and delays in critical processes like license renewals or tax assessments.

Are you Eligible for VAT Registration or Not?

Under UAE law, businesses must determine their eligibility for VAT registration in UAE based on their annual taxable supplies and imports. According to the Federal Tax Authority (FTA), if a company’s taxable mandatory registration threshold of AED 375,000 over the previous 12-month period, VAT registration is mandatory. However, businesses with taxable supplies between AED 187,500 and AED 375,000 can apply for voluntary registration. This ensures that VAT is correctly charged on taxable goods and services. Non-compliance with VAT registration requirements can lead to significant penalties and legal repercussions. Understanding these thresholds is essential for businesses to remain compliant with the UAE’s VAT laws.

Did you make proper tax invoices?

Businesses registered for VAT are required to issue proper tax invoices for every taxable supply. A tax invoice must include specific details such as the supplier’s name, address, VAT registration number, a unique invoice number, the date of issuance, a description of the goods or services supplied, the total amount excluding VAT, and the VAT amount charged. According to the Federal Tax Authority (FTA), failure to issue compliant tax invoices can result in penalties. Proper documentation ensures transparency and accuracy in VAT reporting, which is crucial for staying compliant with UAE’s tax regulations.

Did you receive proper Tax invoices from your clients?

According to UAE VAT Law, businesses must receive proper tax invoices from their clients for every taxable transaction. A compliant tax invoice must contain critical details such as the supplier’s name, address, VAT registration number, invoice date, a description of the goods or services provided, the total amount before VAT, the VAT charged, and the total payable amount. Receiving accurate tax invoices is essential for businesses to claim input VAT and maintain transparent records for VAT filing with the Federal Tax Authority (FTA). Failure to obtain proper tax invoices may lead to compliance issues, incorrect VAT claims, and potential penalties.

Did you Apply for RCM or not?

Businesses must determine if they are required to apply the Reverse Charge Mechanism (RCM) for certain transactions. The RCM shifts the responsibility of accounting for VAT from the supplier to the recipient, typically in cross-border transactions involving goods or services. This applies when a UAE-based business imports goods or services from a foreign supplier who is not registered for VAT Services in UAE. In such cases, the recipient must calculate and report the VAT, ensuring compliance with the Federal Tax Authority (FTA) regulations. Failure to apply the RCM correctly can result in penalties, inaccurate VAT reporting, and missed VAT recoveries. It is essential for businesses engaging in international transactions to assess if the RCM applies to their operations.

Do you have any Adjustments in your Books?

By UAE VAT Law, businesses are required to accurately maintain and update their financial records. Any adjustments in your books, such as corrections to VAT returns, changes in taxable transactions, or rectification of input tax claims must be properly recorded. These adjustments should reflect the correct VAT treatment and be reported to the Federal Tax Authority (FTA) in the relevant tax period. Businesses are also obligated to keep detailed records of these adjustments for at least five years, as mandated by the FTA. Failure to correctly adjust and report financial records can lead to penalties, audits, and non-compliance issues under UAE law.

Is it Required VD or is it in the Limit?

Understanding when to make a voluntary disclosure is crucial for maintaining compliance. Businesses are obligated to rectify any identified errors or omissions in their VAT returns, especially when these inaccuracies exceed AED 10,000. In such cases, it is essential to proactively inform the Federal Tax Authority (FTA) through a voluntary disclosure. While disclosures are not required for errors below this threshold, addressing any discrepancies is advisable to uphold transparent financial practices. Neglecting to report significant inaccuracies could result in penalties, emphasizing the importance of diligent VAT record-keeping and reporting.

How MASAR Chartered Accountants will help you:

MASAR is a certified tax agency in UAE that offers comprehensive support to businesses navigating the complexities of VAT compliance. Their expert team provides tailored services, including VAT registration, preparation of accurate tax invoices, and thorough Health check for VAT to ensure compliance with the Federal Tax Authority’s regulations. MASAR also assists with voluntary disclosures, helping clients rectify any reporting errors while minimizing penalties. With a focus on delivering accurate financial statements and proactive tax planning, MASAR Chartered Accountants is dedicated to enhancing your business’s financial integrity and operational efficiency, allowing you to concentrate on growth and success.

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