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VAT Accounting Services in Dubai, UAE

Value Added Tax (VAT), an indirect form of tax imposed on certain goods and services in the UAE is charged and calculated on the value of goods or service items. Since VAT accounting in UAE requires meticulous documentation, precise recording, and analysis, outsourcing your VAT services to an experienced VAT consultant is necessary to make everything perfect. When it comes to VAT accounting in Dubai and UAE, CDA is one of the most preferred names by diverse businesses across the country. CDA VAT accounting services in Dubai are tailor-made to help your businesses record and maintain their VAT activities and procedures to abide by the UAE VAT law.

vat accounting services uae

UAE VAT Accounting

VAT accounting is a process related to the VAT section of a business concern. It is important for every taxable person to maintain a book of records under UAE Tax Law, and it requires detailed documentation. Proper documentation helps to identify the consumption tax that needs to be paid on time. It reduces the tax burden. The maintenance of VAT records is mandatory in the UAE. Providing the best VAT consultancy services in Dubai and UAE, CDA  provides all the essential activities that you need to be managed with regard to VAT accounting including VAT data, review of tax reports, tax calculation and filing, VAT documentation, etc in a very seamless way. 

Different Types of VAT

There are two types of VAT: -

1. Input VAT

The Input VAT is charged on goods when purchased or on services when offered. If you are a registered buyer with the FTA, the VAT amount will be deducted from your settlement.

2. Output VAT

The output VAT is charged on the sale of goods and services delivered. It is calculated directly. 

VAT rate in the UAE

VAT is charged on different category basis as per the following rate in the UAE:

  • Standard Category

Automobiles, electronic items, fuel, jewellery, food & beverage, apparel, entertainment services, cosmetics, restaurants & hotels, construction, commercial leasing, etc. attract the standard rate of 5% VAT.

  • Zero Category

The export of goods or services, international transportation of goods and passengers, supply of certain means of transport, supply or import of investment precious metals with 99% purity and more, residential buildings, buildings used by charities, certain education services, and certain healthcare services attract a Zero rate VAT.

  • Exempted Category

Financial services, certain residential buildings, bare land, and local passenger transportation are exempted from VAT charging.

VAT Registration in Dubai 

A company should register for VAT if the taxable supplies and imports exceed AED 375,000. A company can register voluntarily if the amount exceeds AED 187,500. Finding reliable VAT accounting consultants in Dubai can solve all kinds of issues related to your VAT procedures. 

Important Documents for VAT Accounting

A business should submit the following documents in order to process VAT Accounting in UAE. 

  • Accounts of all supplies and Imports of Goods and Services.
  • All Tax Invoices and alternative documents related to Goods or Services received and issued
  • All Tax Credit Notes and alternative documents received.
  • All Tax Credit Notes and alternative documents issued.
  • Accounts of Goods and Services purchased and for which the Input Tax was not subtracted.
  • Accounts of exported Goods and Services.
  • Accounts of adjustments or corrections made to accounts or Tax Invoices.
  • Tax due after the error correction or adjustment.
  • Annual Account details
  • General Ledgers
  • VAT Ledgers, Purchase daybooks
  • Credit and Debit notes, etc.

A penalty of AED 10,000 will be imposed on an individual or business who fails to keep proper records of the transactions made. 

Why You Need Proper Accounting for VAT?

VAT accounting in Dubai demands a proper accounting system to make the procedures error-free and accurate. Systematic and well-organised accounting services are required to fulfil the VAT needs in compliance with the UAE law. 

  • Mandatory requirement by law

Proper VAT accounting is mandatory for every taxable business registered with the FTA.

  • Ensures easy tax returns

VAT accounting ensures the access of all the necessary documents relating to tax filing at one place. This can make the tax return filing easy. 

  • Helps the expansion to be flexible

VAT accounting provides the details of the estimated total amount to be paid as taxes. This will help the management to set the budget if it wants to expand the business. 

  • Serves as a checklist

VAT accounting serves as a checklist that allows the business and the concerned authorities to check whether all the tax-related documents are submitted or not, as it consists of the names of the materials to be correctly filled and submitted. 

  • Reduces the burden of tax audit

Proper accounting and financial statements to ensure the business keeps all the data related to all the transactions made by it. It helps the company from future tax audit or inspection from the authorities to conduct the assessment without much burden.

  • Familiarises with new VAT Related Schemes

VAT accounting can create awareness among the companies about how to get the benefits issued by the authorities' from time to time. 

  • Enhances the National Revenue Growth

VAT accounting is a process which calculates and registers the total amount of Taxes to be paid by a company to the government. The proper tax filing will surely fill the coffer that will boost the national growth.

  • Decreases the Risk of Penalties

VAT accounting ensures that the company is complying with all the rules and regulations set by the authority. Proper tracking and payment to FTA reduce the risk of getting an administrative penalty by the government.

Application of Reverse charge mechanism in Accounting System

Reverse Charge Mechanism is a process under which the accountability of paying tax to Government shifts from seller to the buyer. This mechanism is applied on the import of goods and services into UAE. Collection of proper documents relating to the import of goods will be easy to reclaim the tax through RCM. Booking RCM in the system will have accurate VAT 201 form, and the VAT filing should match with the Internal VAT report.

Thus, as a recipient or buyer of goods or services under the reverse charge mechanism, the following responsibility needs to be settled:

    • All the customs documents and its supported invoices
    • Account the value on which tax needs to be levied
    • Determine the VAT due on reverse charge supplies
    • Pay VAT to the government
    • Claim Input Tax, if eligible.
  • Maintain the records such as invoice and other documents to corroborate the tax payment and input tax claim

Accounting Entries for Booking the Tax in the system

  • For Purchase/ Expenses

Purchase Account DR

Input Tax Account DR

Supplier Account CR

  • For Sales Accounts

Customer Account DR

Sales Account CR

Output Tax CR 

  • Output Tax - Input Tax = Net Vat Payable Account

Net vat Payable Account DR

Federal Tax Authority CR

CDA & VAT Accounting Services in Dubai 

CDA is a VAT consultancy firm in Dubai that provides accurate accounts on taxation and accounting tasks. CDA VAT accounting consultants are competent in providing VAT accounting services on behalf of the company to make your VAT accounting procedures simple, cost-effective, and accountable. We will take care of your Bookkeeping and VAT accounting services in Dubai and save you from facing any penalties and fines in your business. 

CDA provides the following VAT Accounting services to the business community:

  • We do the VAT Registration & tax filing process
  • We help you in VAT planning
  • We do the book of records maintenance
  • We maintain your balance sheet carefully
  • We maintain your Profit & Loss account properly
  • We train you on VAT laws in UAE
  • We interpret and classify tax group for you
  • We help you to process with accurate and quick tax filing 
  • We update you with FTA’s new legislation and rules
  • We provide unique advice on financial and legal issues
  • We provide advice on VAT rates
  • We help you maintain the requirements for the Reverse Charge Mechanism
  • We train you on VAT-related accounting for Dubai Expo 2020

CDA has been dealing with the vital process of accounting and taxation for various clients engaged in numerous businesses in the UAE. Our professional experts examine the nature of your business, deal with your VAT issues and makes it easier to handle. With our adept team, we provide quality consultancy services to SMEs, individuals as well as to the big corporates in the field of CFO Services, Auditing Services, Accounting & Bookkeeping Services, Accounting Software services and Due Diligence Services.

If you have any doubts regarding VAT Accounting process or about your current business, feel good to discuss with us. VAT accounting in Dubai, UAE is no more a tedious task. CDA is there for your support! 

Our VAT Accounting Consultants will give you one-hour free session to keep your doubts away!

Frequently Asked Questions [FAQ]

1. Is it mandatory to keep accounting and tax records for 5 years?

Yes, it is mandatory to keep the records for 5 years from the end of the related tax period. With regards to capital assets scheme, the taxable person shall keep the records for 10 years. 

2. Is it possible to configure the VAT Report (VAT 201 Form) in the accounting software?

Yes, it is possible. The accuracy of the report is reliant on the data entry and the proper arrangement of the necessary accounting records.

3. If a tax registrant supplier has appointed a clearing agent, how is it accounted for in VAT?

The appointed VAT registered clearing agent should include a negative adjustment in Box 7 of VAT return - Adjustments to Goods Imported into UAE. This would nullify the figures pre-populated in Box 6 of VAT Return - Goods imported into the UAE. While, for the owner of the goods, the amounts are to be manually entered in Box 7 of the VAT return. The import VAT can be recovered by populating the values in Box 10 - Amounts subjected to the reverse charge.

4. How do I differentiate and account for sales as zero-rated, exempt and taxable?

All local supplies as a normal course of business would be subject to 5% VAT. But, much of the transactions in the fields of Education, Healthcare, Transportation and Real Estate would be accounted for in either head of zero-rated or exempt.

5. What is the information that has to be included in a tax invoice?

  • The invoice should be mentioned ‘Tax Invoice’
  • Date of issuance
  • Customer and Supplier name, address and TRN
  • Description of the goods delivered or services rendered
  • VAT rate 
  • VAT amount payable

6. How do we account for goods supplied within a Designated Zone?

If both the supplier and the consumer are within the Designated Zone, it would be regarded as Out of Scope VAT, except where the supply is consumed within the Designated Zone or when the supply is made to and consumed by an individual in the Designated Zone. In exceptional cases, the standard rate of 5% VAT is applicable. For example, purchase of computer, furniture and similarly consumed by the business (not used for other productions) 

7. How is supply of real estate treated in terms of VAT in Designated Zone?

Supplies of real estate, which includes sale and lease of real estate, within Designated Zones are considered to be out of scope of VAT as it is not treated as ‘consumed’. Supply of services like real estate service experts, licenses performed in Designated Zones is liable to standard 5% VAT.

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