It has been almost two years since the introduction of Value Added Tax (VAT) services in the UAE. It is one of the most complex tax systems that a number of smaller companies find difficult to cope with, thus attracting fines.
Tax experts say some of the most common mistakes made by the small and medium companies in the UAE when filing tax returns are poor planning, hiring of the wrong resources, failure to issue valid tax invoice, non-maintenance of records and mistakes in simply calculating and paying VAT .but failing to file the appropriate amounts As a result, these mistakes can attract fines as high as Dh60,000.
The founding partner at Aurifer Tax Middle East Thomas Vanhee, said failure to plan, hiring of wrong resources, not having the right accounting set-up and limited understanding of the concept of exempt, zero-rated and outside of scope supply are the most common mistakes committed by SMEs in the region.
While for Nimish Goel, partner at WTS Dhruva Consultants Middle East, said non-filing or late filing of the periodic VAT returns; failure to issue valid tax invoice and VAT credit notes; non-maintenance of records and documents as per the requirements of the UAE VAT law; delay in amending the VAT registration on account of addition in branches; and recovery of input tax pertaining to blocked expenses (such as entertainment expenses, expenses incurred in a personal capacity, medical insurance, etc) are the most common mistakes occurred by small entities.
Goel suggested that business owners should take a thorough review of compliances undertaken and positions adopted for the last 18 months, create a VAT governance framework with proper roles and responsibilities defined for the team members, appoint tax experts for periodic review of tax positions and VAT returns, upgrade IT setup to meet the record-keeping requirement and train to the users.
Vanhee, advises that investing in the right people and technology in the solution. With good resources, a good accounting system and dedicated staff, tax compliance can be achieved.