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A Brief Explanation of VAT Returns

A Man's hand pointing out Value Added Tax (VAT) text in a notepad
VAT-registered companies or 'taxable individuals' must subscribe to a 'VAT return' to the FTA at the close of every tax period. A VAT return elaborates on the worth of a taxable person's purchases made during the tax period and demonstrates the individual's VAT liability. The variation between the output tax payable and the input tax for a specified tax period is the VAT liability and should be paid to FTA. When the input tax is above the output tax, the taxable person is entitled to recover the excess input tax, which he can set off against future FTA payments. In this article, let us look more at the things involved in the VAT return.

Learn How to File a VAT Return

You must electronically file your tax return via the FTA portal at Ensure that you have fulfilled all tax return prerequisites before submitting the VAT return form through the portal. Taxable businesses must offer VAT returns regularly within twenty-eight days at the end of the 'tax period.' The 'tax period is a time during which the applicable tax must be estimated and paid. A basic tax period is as follows:

  • Quarterly for companies with annual revenues less than AED150 million
  • Monthly for companies with a yearly income of 150 million AED1 or greater

The FTA, at its discretion, assigns a particular tax period to a specific type of business. Failure to submit a tax return within the specified time will lead to penalties under the Cabinet Resolution of 2017 No. 40 on Administrative Penalties for Tax Law Violations in Dubai.

An Overview on How to File VAT Return & Reduce VAT Liability

Before submitting your VAT return in Dubai, you should be aware of the financial measures that can substantially decrease the amount of VAT you pay every tax period. Credits, deductions, and more fund strategies are among them. They are practical steps businesses can take to improve the VAT cash flow. Certain tax breaks are available to all businesses, while others are only available to qualified companies. It is essential to highlight that the VAT legislation in UAE is constantly changing. The following measures are based on current legislation:

How Can You Reclaim VAT Paid

When you do not formulate solid proof of VAT taxes paid on company expenditures while preparing for VAT return in UAE, you will potentially lose a significant sum of money. All VAT-registered companies in Dubai are eligible for reimbursement for certain business expenses, like machinery and office supplies.

Furthermore, if you lease a car for both personal and business use, you are qualified for a reimbursement of 50% of the funds spent on gas and associated costs. You are responsible for keeping accurate records of your mileage, gas bills, and other related paperwork for filing a VAT return.

Seek Debt Consolidation 

Whenever an account payable becomes a bad debt, the UAE VAT statute provides a VAT refund. This VAT is owed at the VAT duration in which a debtor's account is marked as bad debt.
Reviewing the customer lists and thinking about writing off any outstanding debts discovered is advised. It is possible to deduct the transaction to be given away within the span it occurred by implementing a modification to the firm's prevailing VAT return.

A UAE-registered management consultancy firm, Fortius Consulting helps businesses remain compliant with UAE corporate laws. We employ the best methods to reduce UAE tax liability and optimize your tax filings. Join us for expert tax advice and planning for your business.

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Make Annual VAT Recovery Adjustments 

If the firm's operations include some activities that apply to VAT taxation while others are not, a VAT adjustment must be submitted with the UAE's FTA within a specific time after the fiscal year ends. If the value for VAT recovery is incorrectly calculated, a VAT alteration must be given to the tax authority.

The time limit for all non-resident companies operating to file for VAT refunds via the VAT refund submission is quickly approaching. Non-UAE businesses must consider if they have gained VAT that qualifies for refunds from the 1st of March 2022 to the 31st of August 2022.

Keep Track of All Important Information 

Prevent committing the error of ignoring tax breaks. When VAT reimbursed on business expenses is not brought back via VAT return filing in UAE, a VAT-registered business may lose money. Therefore, record-keeping is critical. Always keep records for products that can be retrieved because they can help you reduce your VAT liability while also increasing your overall turnover.

Professional doing bank financial transactions.

Explanation of Making Grants, Sponsorships & Donations

Donations, sponsorship, and grants are not considered a surplus and are excluded from VAT if the earnings originate from a non-business transfer. Any donation, sponsorship, or grant must be freely offered without strings attached to avoid taxation. For such a procedure to be considered applicable, the income must be unlimited and unconditional. In such cases, the VAT incurred by the company making a donation, sponsorship, or grant may be eligible. However, VAT will be charged when there is a clear correlation with payment.

For example, if a VAT-registered company gives away materials to a local hospital, the hospital will provide the giver with an area to display its products. However, sponsorship or donation is not taxable if a business makes a voluntary contribution without obtaining benefits. Tax on these items can be reclaimed when filing a tax return in Dubai.

Also Read : A Comprehensive Guide to VAT Refunds

The Bottomline

TAX return documentation in Dubai is required quarterly, but it can also be done monthly if the UAE FTA deems it. Numerous spendings of VAT-registered companies are deductible if they are for the intent of doing business. However, some are not recoverable as input taxes. Consult with the best business consulting services like Fortius Consulting Services before filing your future tax return to guarantee your business is financially prudent. Small profit margins can be transformed into huge profits with our experts in UAE, strengthening your company's cash flow. Call us right away!