VAT Compliance Audit in UAE

Consumers in UAE are expected to pay VAT on their purchases for the majority of the goods and services. The UAE Minister of State for Finance Affairs has indicated that the UAE will adopt VAT at the rate of 5 percent on 1st January 2018. There are various exceptions that will not fall under taxation which may include Basic Food, Medicine/Healthcare, Education, Etc. Other nations from GCC may also impose VAT by 1st January of 2018 or 1st January of 2019.

What is the purpose behind the VAT introduction in UAE?

The government is providing public services to the citizens and inhabitants such as hospitals, roads, public, schools, parks, trash control, police and defense services and much more. To meet the spending for its services, the government has to create large money. It can be achieved by levying taxes. UAE is a member nation of GCC, It is extremely tightly related through “The Economic Agreement between the GCC states” and “The GCC Customs Union”. All the member countries of GCC have worked together in formulating and implementing new public policies.

The threshold for VAT registration


If the annual revenue of the firm is less than AED 187,500, the company need not be registered under the legislation.
If the annual revenue of the company is between AED 187,500 and AED 375,000, it is optional to register under the UAE VAT law.
It is mandatory for the firm to register under the UAE VAT law if the annual turnover of the company is more than AED 375,000. Unique restrictions will apply to the Real Estate Businesses and special rules are expected to apply to the intra-GCC trade items.

What are the important actions to be taken by Businesses in UAE?

Businesses should figure out whether their goods or service are taxable. If they fall within the VAT law, they should register under the VAT registration portal before the end of 2017. They should make appropriate modifications in financial management and bookkeeping along with recording their financial transactions, carefully documenting their firm income, costs and associated VAT charges. Make essential modifications in technology and human resource in order to prepare for VAT and also changes to be done to their accounting software. Businesses have alternatives of either hiring VAT professionals or outsourcing the job. Any taxable person must maintain VAT invoices issued and received for a minimum of 5 years. When the right guideline and law is provided by the government, businesses should clarify with the professionals whether their goods and services are taxable.

Vat Compliance Audit

Businesses in the UAE are not sure whether they had done their returns properly and a few filled their returns inaccurately. After the establishment of VAT, enterprises should file their VAT returns either monthly or quarterly as required by the Federal Tax Authority. There should not be any mistakes done while filing the returns to the authority to avoid the penalty.

At our company, Alliott Management Consultants our steps of completing a compliance audit is condensed into

Reviewing accounting/bookkeeping software.
Reviewing output/input tax.
Review your VAT returns on a regular basis.
Checking your TAX due amount.