The United Arab Emirates and the Kingdom of Saudi Arabia began the implementation of Value Added Tax (VAT) on January 1, 2018 at the rate of five percent, while other GCC countries are expected to follow in the near future.

As VAT is new to the region, it is imperative for business owners to be aware and comply with the new regulations in order to avoid stiff penalties which could be as high as AED 50,000.

Seven tips for UAE businesses to avoid financial penalties that may be imposed due to violations, errors or incorrect record-keeping include:

Register for VAT
Every company offering taxable goods or services with an annual revenue of AED 367,000 and above is required to register for VAT. However, those with an annual revenue between AED 200,000 and AED 367,000 will have the option to register.

Record all transactions
The law requires businesses that meet the minimum annual turnover (as evidenced through financial records) to register and keep a record of all their business income, costs and other associated VAT charges, whilst ensuring all records are up to date.

Collect VAT
Every business essentially plays the role of a tax agent, collecting on behalf of the government VAT on goods and services purchased by their consumers.

File VAT return
VAT returns must be filed monthly if your company has an annual turnover above AED 150 million. Businesses with revenue below that level must file quarterly.

Understand zero rates and exempt suppliers
The FTA has exempted some businesses in priority sectors from tax. Being a zero-rated supplier means that the goods being supplied are still VAT taxable, but at the rate of zero percent.

Reverse charges
Reverse charges are the amount of VAT one would have paid on goods or services if they were purchased in the UAE. These charges apply when goods and services are imported from outside the GCC.

Get the basics right
A tax invoice must be issued within 14 days of the date of supply. It is mandatory for a tax invoice to include the name, address and tax registration (TRN) of the registrant making the supply.