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Tips to Configure VAT & Reduce Penalties After Setting up a Company in UAE

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VAT penalties imposed on small businesses in the UAE can be very serious. Consequences to noncompliance are grave, so it is necessary to have the right measures set in place when setting up a company in UAE to avoid them and take timely action. VAT penalties in UAE can be imposed for various reasons and can have far-reaching consequences when one is setting up small business. This is why it is important to configure VAT regularly. When a business fails to submit VAT returns to the Federal Tax Authority (FTA) by the assigned deadline, then a default against the company is recorded. Failing to submit VAT returns before the deadline leads to a penalty.

Common VAT Violations by UAE Businesses

Every business should be fully aware of the different kinds of violations and risks that can happen so as to ensure that they can introduce adequate measures to avoid committing them. The most common ones that can be observes in the UAE are the late filing of VAT returns, errors or omissions in the VAT returns, failure in notifying the FTA of any change in the policies of a company that affect the business’ liability for VAT, inaccuracy owing to the lack of taking reasonable care, wrongdoings related to VAT, and using unfair means to reduce VAT Penalties.

The best way to reduce VAT penalties is to avoid them in the first place. Some ways to manage finance and accounting to prevent penalties are:

Set up of a Proper System for VAT Accounting

Failure in keeping an accurate and effective system to configure VAT and manage accounting of the business is one of the main reasons for noncompliance in tax. As soon as the business completes its VAT registration, it is crucial for it to handle all the different requirements of the VAT.

Even though keeping everything to be documented can involve a lot of manpower and paperwork, it is very important for businesses to keep their bookkeeping on track. The FTA requires financial records of the business. If records are maintained with accuracy and precision, chances of violations related to VAT in UAE can be greatly reduced.

Keeping Track of Deadlines

It is necessary to know the correct amount in taxes and try to fulfil all obligations and paperwork on time in order to avoid being imposed with a fine. VAT returns can be completed with the help of a regulated VAT advisor in Dubai. As soon as the company’s VAT return is submitted, the VAT advisor must receive a receipt and retain a copy of the VAT returns submission receipt for future records.

Reporting Any Mistakes

Due to the complicated calculations involved in the calculation of VAT, errors can still happen. If a business discovers mistakes or miscalculations in its VAT returns, they must be rectified immediately. By checking VAT accounts regularly and having them double-checked by VAT advisors and experts can greatly reduce any chances of mistakes. Another way is to conduct several reviews of accounts prior to submitting the VAT returns.

Seek the Advice of Experts

Having the company accounts backed by VAT advisors and UAE tax experts can help you clear all doubts and questions. Company owners and executives can also send their questions to the FTA to get accurate answers. Still, having a competent and professional VAT advisor who can assess your situations and business requirements thoroughly is always preferable.