The Federal Tax Authority (FTA) issued Federal Decree-Law No. 8 of 2017 to establish Value-Added Tax (VAT) in the UAE on January 1, 2018. Understanding how this tax impacts companies and customers is crucial for small businesses to comply with and optimize VAT.
We’ll explain VAT in 2025 for UAE small enterprises in this straightforward tutorial. We’ll explain everything from registration to submitting VAT returns and recovering VAT on purchases to prepare you for VAT. We’ll also discuss small company blunders and how to prevent pricey fines.
A Step-by-Step Guide to Registering for, Filing, and Reclaiming VAT in the UAE
Registering for VAT
VAT registration is required for UAE enterprises with taxable supplies and imports above AED 375,000. Businesses with taxable supplies above AED 187,500 may still register voluntarily.
Register on the FTA website. Registration approval usually takes 2-3 weeks. Your firm must include its VAT number on tax invoices and VAT-related papers after registration.
Filing VAT Returns
After VAT registration, your firm must submit quarterly VAT returns to the FTA. By the 28th day after the quarter ends, you must submit your sales, purchases, and VAT collected and paid. If your firm must submit monthly, the FTA will tell you. VAT returns must be filed online using the FTA Portal. To guarantee your VAT return is right, maintain detailed records of all transactions during the quarter.
Reclaiming VAT
Companies registered for VAT may recover VAT paid on purchases connected to their operations—that is, inventory, tools, and services—using the input tax approach. Supporting claims calls for accurate records and invoices. To be qualified for a VAT refund, the purchase must be for business use, have a current tax invoice from the seller, and show up in VAT returns. Two excluded non-refundable items are residential dwellings and life insurance.
Common VAT Mistakes SMEs Make and How to Avoid Penalties
VAT compliance may be intimidating for small firms, and errors can be expensive. Businesses often make the following mistakes, and here’s how to prevent them:
Missing VAT Registration Thresholds
Small firms often fail to monitor their taxable revenue, which causes them to miss VAT registration deadlines. They are legally required to register if their turnover is above AED 375,000, and failure to do so may result in fines. Businesses may prevent this by routinely monitoring their turnover and, if they are nearing the threshold, considering voluntary registration, which would enable them to recover VAT on purchases.
Incorrect VAT Invoices
Since companies are required to provide tax invoices for all taxable transactions, including the VAT rate, amount, and number, incorrect VAT invoices are a frequent mistake. Make sure your invoicing system automatically creates tax-compliant invoices to prevent this, since it will save time and minimize mistakes.
Not Keeping Proper Records
Since the FTA requires companies to keep records for a minimum of five years, inaccurate or missing VAT records may cause problems. Businesses should put in place a strong record-keeping system to monitor sales, purchases, and VAT payments to prevent this since it will streamline VAT reports and lower mistakes.
Not Filing VAT Returns on Time
Penalties for late VAT returns include AED 1,000 for the first time and AED 2,000 for successive infractions within 24 months. If required, use accounting software to automate VAT filing and create reminders to prevent fines.
How GPA Helps Businesses Navigate VAT Compliance with Ease
GPA makes it easy for small businesses in the UAE to follow VAT rules. They can help you register for VAT, file reports, and get back VAT that you paid on purchases. GPA makes sure that all required paperwork is turned in on time. GPA also help businesses stay in line with VAT by offering financial services, keeping correct records, and answering questions about VAT. Small businesses can stay on top of their duties and avoid fines if they have the right tools and methods in place.
For expert VAT services, bookkeeping, corporate tax advice, and much more, contact GPA Accounting today and let us take the stress out of your VAT compliance.
