A stumbling block for governments in the GCC region is the administration of tax as they have to build the experience and infrastructure to collect and enforce compliance.

The governments will rely on tax registered companies to collect the tax and deposit the tax periodically as per the schedule for filing returns.

The governments will impose a Self-Assessment procedure. The onus will be on the registered company to compute the tax payable by proper accounting of the Output VAT collected and adjusting against the Input VAT paid. The registered companies will be required to maintain the records for a specified period and present the records for scrutiny. This period will be initially set for 5 years in UAE.

Penalties will be imposed for non-compliance. The Cabinet Resolution No. (40) Of 2017 on ‘Administrative Penalties for Violations of Tax Law in the UAE’ has been issued. The document outlines the penalties to be imposed on violations of the UAE VAT Law including registration, timeliness of filing returns and accuracy of computing tax payable. To view details, visit: http://goo.gl/gjsLaS

Examples of actions and omissions that may give rise to penalties include:

• A person failing to register when required to do so
• A person failing to submit a tax return or make a payment within the required perio
• A person failing to keep the records required under the issued tax legislation
• Tax evasion offenses where a person performs a deliberate act or omission with the intention of violating the provisions of the tax regulations

The entire compliance process will entail:

Registration

All business entities licensed by the various economic agencies such as the Department of Economic Development (DED), the Free Zone Authorities will be required to register and obtain a VAT Registration Number.

For more details on registration click here.

Filing of Returns

Companies are required to file returns periodically. Initially companies will be expected to file returns every quarter or monthly depending on their turnover.

By the end of the each filing period business must compile the data on tax paid and tax collected and file the returns following the computation guidelines.

A tax liability can accrue as early as the date on which an order advance is received. If no advance is received then the date of delivery or invoice, whichever is earlier will be taken into consideration.

Sales Returns

Companies will be allowed to reverse the tax paid on Sales returns.

Bad Debts

The Law will have a provision to account for bad debts and recover the tax paid on such transactions.

-Computing returns and depositing the tax on schedule requires drawing up a schedule that works backwards from the final submission date. Insert a review time before the final date to allow you to thoroughly review the records before the submission date. It is also imperative to manage the cash flow to ensure that cash is available for making the deposit.

Automation Tools

Automated tools may help you to continuously record the tax liability and give you visibility of your tax liability on a daily basis. The tax tools may also help compute the tax returns and may as well file them electronically

Audit of Records

Government may directly or through its appointed agents demand to audit the tax returns of the companies.  Companies are required to maintain physical records of all purchases and supplies as also maintain complete registration details of suppliers and customers.

Although a complete digital system for tax filing will be in place, the government may expect companies to furnish proof of returns.

The VAT will be based on Self-Assessment and the onus will be on the companies to accurately account for the output and input tax.

Audit

Keep in mind that Audit can be a long drawn and cumbersome process if records are not kept in accordance with the law. It is a best practice to keep the end in mind when planning the entire VAT implementation program in your company.

Digitize Records

It is essential to bring in the discipline of maintaining records as per the VAT classification so that they are easy to retrieve when demanded by authorities. A good idea may be to digitize records and store them electronically for easy retrieval. Digitised records may not be accepted and you may still have to maintain physical records however they make it easier to retrieve and present immediately.

Tax Invoice

The Ministry of Finance in the Executive Regulation for the Federal Decree Law No. 8 of 2017 Value Added Tax has laid down the guidelines for the preparation of a TAX INVOICE and a SIMPLIFIED TAX INVOICE.

As per the law the definition of a Tax invoice is: A written or electronic document in which the occurrence of a Taxable Supply is recorded with details pertaining to it.

• A Tax Invoice shall contain all of the following particulars:
  1. The words “Tax Invoice” clearly displayed on the invoice.
  2. The name, address, and Tax Registration Number of the Registrant making the supply.
  3. The name, address, and Tax Registration Number of the Recipient where he is a Registrant
  4. A sequential Tax Invoice number or a unique number which enables identification of the Tax and the order of the Tax Invoice in any sequence of invoices.
  5. The date of issuing the Tax Invoice.
  6. The date of supply if different from the date the Tax Invoice was issued.
  7. A description of the Goods or Services supplied.
     1. For each Good or Service, the unit price, the quantity or volume supplied, the rate of Tax and the amount payable expressed in AED.
     2. The amount of any discount offered.
     3. The gross amount payable expressed in AED.
     4. The Tax amount payable expressed in AED together with the rate of exchange applied where currency is converted from a currency other than the UAE dirham.
  8. Where the invoice relates to a supply under which the Recipient of Goods or Recipient of Service required to account for Tax, a statement that the Recipient is required to account for Tax, and ato the relevant provision of the Decree-Law.

Simplified Tax Invoice

A simplified Tax Invoice shall contain all of the following particulars:

1. The words “Tax Invoice” clearly displayed on the invoice.
2.  The name, address, and Tax Registration Number of the Registrant making the supply.
3. The date of issuing the Tax Invoice.
4. A description of the Goods or Services supplied.
5. The total Consideration and the Tax amount charged.

Note: All invoices must include the TRN Number of the organization. The FTA has developed a VAT TRN Verification portal to check the validity of the TRN Numbers you receive from your business partners and suppliers. Watch the video of TRN Verification 

TRN Verification Process Video

For more information on invoice click here:

• Simplified Tax invoice.
• Detailed Tax Invoice.
• Tax Registration Number TRN.

Click here to view the E-learning module on Tax Invoices and Credit Notes