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Common VAT Mistakes

Mistakes are inevitable; however, ignorance is no excuse.

Modern-day small business owners face dozens of decisions each day and require attention to stay on top of day-to-day operations. With all the work that you do and has to attend to, especially now with the introduction of VAT in the UAE, it’s no surprise that mistakes occur unconsciously.

Many businesses have got into trouble just because they have overlooked the VAT Filing date. Paying close attention can make a big difference in avoiding them. Unfortunately, most of the common VAT mistakes occur unconsciously.

We list here the most common VAT mistakes that we have encountered with our clients and you might be doing the same. You can find a couple of interesting cases summarized below to rectify them before your next VAT return is due:

  1. Lack of knowledge what rate (zero or standard rated) should be charged on sales.
  2. TAX Invoice mandatory information is missing leads to the issuance of invalid tax invoices.
  3. The TRN Number of the customer has not been checked.
  4. Insufficient number of tax codes within the VAT accounting system to allow for accurate VAT reporting.
  5. VAT implications of inter-GCC sales. Businesses are required to register in other GCC implementing states in certain cases.
  6. Incorrect VAT computation for business using profit-margin scheme.
  7. Wrong computation for capital assets under Capital-Assets scheme.
  8. Lack of knowledge for RCM (Reverse Charge Mechanism) implications. Import VAT is calculated on all custom duty charges.
  9. Ignoring special place of supply rules for goods and services. Example, electronically supplied services where the place of supply is the country where services are enjoyed.
  10. Using the wrong rate percentage.
  11. Lack of satisfactory evidence to support VAT reclaims.
  12. Claiming input VAT on private/non-business.
  13. Incorrectly claiming VAT on private use of motor vehicles.
  14. Claiming VAT on unallowed entertainment expenses or not claiming VAT on staff entertainment.
  15. Not charging VAT on “non-standard business” transactions e.g. disposal of business assets, directorship fees, scrap sales, barter transactions, etc.

 

Expert’s Advice:

Make sure to take a step back and seek advice from an expert whenever you encounter any of the above. VAT is not an evil nor burden if you do it the right way. Let’s look at the brighter side. It can actually help your business gain some valuable insights into your business reporting.

For instance, do you want to better understand where your current business is standing? Understanding your financial numbers and to make smart decisions? Does your business model work?

Proper book-keeping is a vital part of your business operations to ensure continuous growth and better decision making rather than just a compliance to FTA.

Our Registered Tax Agents at Averyx Group can provide you expert advice for the following:

  • We resolve any VAT related issues. As a Registered Tax Agent, we act on your behalf to resolve tax-related issues with the FTA when required.
  • We make sure your tax invoices and documents are valid and compliant with FTA to ensure you do not face any problems with the authorities.
  • We prepare clarifications / expert opinion specific to your business scenario.
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