VAT Services in the UAE

Sovereign Group has been assisting clients worldwide with their various tax obligations for more than 30 years. It has had a presence in the UAE since 1998 and has been at the forefront of corporate services’ provision to clients based in the region.

With the recent introduction of Value Added Tax (VAT) in the UAE, our team of qualified chartered accountants has been focused on clarifying and explaining our clients’ VAT obligations in the simplest way possible, and then implementing and executing reliable procedures to ensure their VAT compliance.

This strategy has enabled our clients to concentrate on their core business without being distracted by the imposition of this new tax on goods and services in the UAE. The range of VAT-related services that Sovereign can offer is as follows:

VAT Consultation/Advisory: This is the most important aspect of our service. It gives us the opportunity to fully understand the day-to-day operations of a client’s business, the type and volume of supplies they make, their VAT inputs and outputs, the applicability of reduced rates and exemptions, and their record-keeping capacity. This enables us to assess how VAT applies to their business and identify the changes that are required to their existing accounting systems and business processes.

VAT Registration: The VAT law sets out mandatory and voluntary VAT registration thresholds. It is essential to determine which activities of the business are considered to be taxable supplies for VAT registration purposes. In some instances, it may be beneficial for certain businesses – typically start-ups with no sales and very high expenses – to register for VAT on a voluntary basis so that they can recover their input tax early. It is also important to ensure that a company gets registered for VAT within the specified deadline to avoid penalties for late registration.

The VAT registration process requires a number of documents to be submitted to the Federal Tax Authority (FTA). Uploading insufficient or incorrect documents can delay the approval process significantly. Furthermore, some sections of the application need to be completed in Arabic. Our team has prepared a simple checklist of all such documents and can provide samples of the various formats required by the FTA. We only submit an application after we have thoroughly reviewed all the documentation. This will help to ensure a swift and straightforward VAT registration.

VAT Implementation: Sovereign will undertake a forensic review of every business area likely to be impacted by the VAT regulations to ensure that the operations and processes are fully in compliance. The format of documents and wording on contracts may have to be revised, and some businesses may need to re-evaluate current pricing strategies to accommodate the impact of VAT. It is also essential to identify whether a firm’s current accounting system has the capacity to process various types of output and input VAT, as well as to generate VAT return files and FTA Audit files in the approved formats. Businesses will also have to assess the effect of VAT on their cash flow and identify ways to minimise any negative impact. Sovereign can assist clients to address all these issues.

VAT-compliant Bookkeeping: Many of our clients outsource their entire accounting function to Sovereign. We ensure that clients’ books of accounts are updated in a timely manner and all sales, purchases and expense transactions are recorded in full compliance with VAT regulations. We will also prepare the invoices and credit notes as per FTA-approved formats. It is essential to charge the correct VAT amount on each relevant supply and it is equally important to claim input VAT only on permitted transactions under the VAT legislation. Errors in this respect may attract unexpected penalties in future. Sovereign’s bookkeeping service also includes the preparation of financial accounts on a monthly basis, which assists our clients to stay up-to-date with their business performance and financial position.

VAT Returns: VAT returns must be filed on a monthly or quarterly basis, depending upon the size of the business. There are specific deadlines for these returns and incremental penalties are applicable for default. These filings involve a declaration of standard-rated supplies, zero-rated supplies, exempt supplies, reverse charge transactions, imports and relevant taxes. A well-maintained accounting system and process is essential to produce the correct figures with ease at the right time. Sovereign can assist clients with the correct and timely filing of VAT returns, and can also provide guidance with the process of settlement for amounts due.

VAT Recovery: Businesses whose input VAT exceeds their output VAT for the period, are entitled to seek reimbursement from the FTA. The FTA may request an explanation or further supporting documents before processing the refund. Sovereign can liaise with the FTA on behalf of clients on all tax related matters. Sovereign can respond to FTA queries, submit requests for reconsideration of FTA decisions, and assist clients with any tax audits conducted by FTA. Where appropriate, Sovereign can also apply for de-registration of VAT on a client’s behalf.

Sovereign can provide all of the above services on the basis of either a comprehensive VAT package or a specific service unit. We understand that every client’s situation is different and have the flexibility to tailor our services to a particular client’s requirements. Our aim is always to combine the highest level of professional service with the most straightforward approach, such that our clients obtain a complete and transparent understanding of their tax-related obligations within the UAE.