If you’re a business owner in the UAE, you’ve probably heard a lot about VAT since it was introduced in 2018.

At 5%, it’s one of the lowest VAT rates in the world, but that doesn’t mean the filing process is completely straightforward. For many businesses, VAT filing can feel like a daunting task, especially if you are new to the process. However, it doesn’t have to be.

Once you get the hang of the steps involved, it will become a straightforward routine you can complete with ease.

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Understanding VAT Filing Basics

Before we weget to the step-by-step guide, let’s get clear on the basics. VAT is a tax on the consumption of goods and services. If your business is registered for VAT, you’re required to charge VAT on your sales (output tax) and can reclaim VAT on your purchases (input tax). At the end of each tax period, you calculate the difference between these two and either pay the government the net amount or claim a refund if your input tax exceeds your output tax.

Now, VAT returns in the UAE are submitted online through the Federal Tax Authority (FTA) portal, which is user-friendly once you get used to it. Tax periods are typically quarterly or monthly, depending on your business turnover, so it’s important to stay on top of your deadlines to avoid penalties.

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Step 1: Gather Your VAT Records

The first step is all about preparation. VAT filing requires accurate records of your transactions during the tax period. This includes:

• Sales invoices showing the VAT charged to your customers.

• Purchase invoices from your suppliers that show the VAT you’ve paid.

• Credit and debit notes, if there were any adjustments.

• Other documents, such as import/export declarations, if applicable.

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Keeping your records organised is key. Ideally, you should use accounting software that tracks VAT automatically. If needed, professional assistance from firms such as Metaworld Consultant can help streamline this process. However, if you’re handling things manually, double-check all yourcalculations and make sure nothing is missing.

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Step 2: Log In to the FTA Portal

To file your VAT return, you need to access the Federal Tax Authority’s online portal (https://www.tax.gov.ae). If you have already registered, log in using your username and password. If not, you’ll need to register your business for VAT first.

Once you’re logged in, head to the VAT Returns section. You’ll see an option to “create a VAT Return”. Click on it, and you’ll be directed to the VAT filing form (VAT201).

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Step 3: Fill Out the VAT201 Form

The VAT201 form is where you’ll input all the details of your VAT transactions for the tax period. Here’s a breakdown of the key sections:

1. Taxable Supplies (Standard Rated):
Enter the total sales amount subject to the standard 5% VAT rate. This includes the VAT charged to customers.

2. Zero-Rated Supplies:
If you’ve made sales that are VAT-exempt (e.g., exports or certain financial services), enter those here.

3. Exempt Supplies:
Include any sales that are entirely exempt from VAT.

4. Input Tax Recovery:
This is where you report the VAT you’ve paid on business purchases. Make sure to only claim VAT for expenses that are eligible for recovery.

5. Net VAT Payable or Refundable:
The system will automatically calculate the difference between your output tax and input tax. If the result is positive, you owe the FTA that amount. If it’s negative, you’re eligible for a refund.

Double-check all the numbers before you proceed. Small errors can lead to penalties, so it’s better to spend a little extra time reviewing your entries or reach out to Metaworld Consultant for assistance to avoid these common mistakes

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Step 4: Submit Your VAT Return

Once you’ve completed the VAT201 form and verified that everything is accurate, hit the submit button. The FTA portal will process your return, and you’ll receive a confirmation.

If you owe VAT, you’ll need to make the payment by the due date to avoid penalties. Payments can be made via online bank transfer, credit card, or through the GIBAN (Generated IBAN) provided by the FTA.

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Step 5: Keep a Record of Your Submission

After filing your VAT return, make sure to save a copy of the confirmation and keep it with your records. The FTA requires businesses to retain VAT-related documents for at least five years, so proper documentation is essential.

Tips to Avoid Common Mistakes

1.  Incorrect Tax Invoices:
Ensure that all your invoices meet the FTA’s requirements. This includes having a unique invoice number, your TRN (Tax Registration Number), and the correct VAT amount.

2.  Claiming Ineligible Input Tax:
Not all expenses are eligible for VAT recovery. For example, personal expenses or entertainment costs for staff are not claimable.

3.  Missing Deadlines:
Late filings or payments come with hefty penalties. Set reminders for VAT deadlines to stay on track.

4. Rounding Errors:

VAT amounts should be rounded to the nearest fils (two decimal places). Even small discrepancies can raise flags.

5. Ignoring Changes in Business Operations:
If your business undergoes changes, such as crossing the voluntary or mandatory registration threshold, update your VAT registration details accordingly.

What Happens If You Make a Mistake?

Mistakes happen, and the FTA understands that. If you realize you’ve made an error in a previous VAT return, you can submit a voluntary disclosure form to correct it. However, it’s better to get things right the first time to avoid penalties and unnecessary paperwork.

Make Sure Your Filing is Accurate

Accurate VAT filing ensures that your business operates smoothly. It also allows you to manage your cash flow better by reclaiming eligible VAT expenses.

If you’re new to VAT or find the process overwhelming, don’t hesitate to seek professional help. Many accounting firms in the UAE, like Metaworld Consultant specialize in VAT compliance and can manage the process on your behalf