VAT Accounting

The Value Added Tax decree law was launched on 27th August, 2017 in UAE. However, it was implemented on 1st January, 2018. VAT is an indirect tax that is applied to imports and exports of goods and services. Certain products are subject to the standard 5% VAT rate while some sectors such as healthcare, education, and general consumer goods are exempted from it.

Major Elements of VAT:

  • Registration: Registration for VAT is mandatory for businesses if their imports and supplies are greater than AED 375,000 on yearly basis. Businesses with supplies exceeding AED 187,500 can voluntarily register for VAT.
  • Import Tax: Tax is imposed on the goods that are imported into UAE.
  • VAT Reporting: Reporting of VAT is necessary. This report includes the amount of VAT that the registered businesses have charged and paid to the Government.
  • Goods and Services: Standard 5% VAT rate is imposed on certain goods and services that comply with the decree law.
  • Tax Invoice: This document is significantly important as it contains relevant tax information on the supplies.
  • Estimate: The amount of tax is imposed based on different factors. These factors are supported by executive regulation to deal with earnings, discounts, coupons, etc.
  • Implementation: The implementation of VAT in the accounting process of businesses can have an impact on various aspects like cost, IT system updates, and supply agreements.
  • Tax-free zones: Certain free trade sectors have been marked as designated zones by the UAE cabinet. Tax is not imposed on the transition of goods and services made through these areas.

VAT Accounting in UAE:

Accounting is the process of keeping track of the financial transactions of a firm. Every business must carry out the process of accounting with precision and transparency. A bookkeeper can look out for this in small businesses while a certified accountant is necessary for large enterprises. These reports play an important role in the decision-making of the business.

VAT accounting tracks a company’s resources, obligations, and earnings to quantify and predict the growth and development of your business. According to VAT law, every individual shall maintain the books of records and save them for a minimum of 5 years. All the investors and associates of businesses in UAE must ensure that the books of records adhere to the VAT law. It is also advised to keep an electronic copy of accounting records.

VAT Procedure:

  • Monthly bookkeeping: Following the Tax Procedures Law, all businesses must provide the records to the Federal Tax Authority (FTA) on monthly basis.
  • VAT Recording and Reporting: The VAT return process is assisted by providing all the relevant information about the business.
  • Financial Reports: Completely audited financial reports must be presented as per International Financial Reporting Standards (IFRS).
  • Inventory Management: Standardized way to find the stock in correct levels at an appropriate cost.

Maintaining records clearly and accurately can support the VAT return process. However, the best possible way is to hire a consultancy agency that can assist you with the entire VAT accounting process professionally.

Why AKA Management Consultancy:

Our skilled team strives hard to assist you with the entire VAT-related processes expertly and support you with your targets and requirements. We will comprehend your business and carefully examine the impact of VAT on your business under UAE rules and compliance.

    Get a Consultation

    Contact us at the office or submit a inquiry online.