Running a business in Dubai demands sharp focus on VAT compliance. Miss a step, and penalties hit hard. This guide arms you with practical steps to nail your next filing.
Understand UAE VAT Basics
UAE introduced VAT at 5% in 2018 under Federal Decree-Law No. 8. Businesses register mandatory if taxable supplies top AED 375,000 annually. Voluntary registration kicks in above AED 187,500.
Keep records for five years, now a strict rule from 2026 amendments. Track all invoices, receipts, and ledgers meticulously. Non-residents register without thresholds if they make taxable supplies here.
Key VAT Registration Rules
Spot when registration applies early. Calculate taxable turnover from goods and services supplied in UAE. Exceed AED 375,000? Register within 30 days via FTA portal.
Gather documents: trade license, passport copies, Memorandum of Association. Submit online; approval takes 2-3 weeks. Deregister if turnover drops below AED 187,500 for 12 months.
- Confirm turnover accurately, excluding exempt supplies.
- Use FTA’s EmaraTax portal for seamless application.
- Appoint a tax agent if needed for complex setups.
Master Tax Invoices
Issue tax invoices for supplies over AED 10,000 to VAT-registered buyers. Include “Tax Invoice” header, supplier/recipient TRN, date, description, quantity, VAT rate, and totals.
Simplified invoices suffice under AED 10,000. Retain copies five years. From 2026, ditch self-invoicing for reverse charge—keep contracts instead.
- Supplier name, address, TRN.
- Unique serial number.
- VAT-exclusive amount, rate (5%), and total payable.
Nail Filing Deadlines
File quarterly if turnover under AED 150 million—within 28 days post-period. Monthly for larger firms. Example: Q4 2025 ends December 31; file by January 28, 2026.
Log into FTA e-Services. Reconcile input/output VAT. Pay any balance due same time. Late filing? Expect AED 1,000 monthly up to AED 10,000 max.
Set reminders. Quarterly cycles: Jan-Mar (due Apr 28), Apr-Jun (Jul 28), etc. Special periods? FTA notifies via portal.
Spot Common Mistakes
Businesses trip on input VAT errors—claim only valid, supported amounts. Ignore partial exemptions at your peril; apportion correctly.
Late payments rack up 200 AED monthly plus 1.5% interest on late tax. Forget TRN on invoices? AED 2,500 per miss. Double-check calculations quarterly.
- Misclassify supplies as zero-rated.
- Overlook reverse charge on imports.
- File without reconciling accounts.
Penalties That Sting
FTA slaps AED 5,000 for not displaying VAT-inclusive prices. No tax invoice? AED 2,500 each time. Late deregistration: AED 1,000/month, capped at 10,000.
Errors disclosed voluntarily: 5% tax shortfall if before audit notice, plus AED 3,000 fixed first time. Post-notice: jumps to 30-50%.
|
Violation
|
Penalty (AED)
|
|---|---|
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Late VAT return
|
1,000/month (max 10,000)
|
|
No tax invoice
|
2,500 per instance
|
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Incorrect records
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5,000 first, 10,000 repeat
|
|
Voluntary error (pre-audit)
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5% + 3,000 fixed
|
Best Practices for Compliance
Implement ERP software for real-time tracking. Train staff on VAT rules quarterly. Conduct internal audits before filing.
Leverage 2026 changes: five-year refund deadline means file claims promptly. Verify supplier legitimacy before input claims. Use digital tools like Pemo for automation.
- Maintain Arabic/English records.
- Reconcile monthly, file accurately.
- Seek FTA clarifications early.
Use Voluntary Disclosure Wisely
Spot an error? Disclose via FTA form before audit. Pay 5% on shortfall plus fixed fee which is far better than audit penalties. Repeat? Fixed rises to 5,000 AED.
Time it right: pre-notice saves most. Submit with supporting docs. FTA processes quickly if complete.
Prep for 2026 Changes
New amendments effective January 1, 2026 simplify reverse charge—no more self-invoices, just docs. Refunds? Claim within five years post-reconciliation.
Strengthen anti-evasion: verify supplies fully. Update systems now. These tweaks cut admin but demand precision.
At Prema Consulting, we guide businesses through VAT compliance daily. Our team handles filings, audits, and optimizations tailored to your operations. Contact us today to avoid penalties and thrive. Let’s chat about your next filing!
