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Vat Accounting Services

VAT accounting is a process related to the VAT section of a business concern. It is important for every taxable person to maintain a book of records under UAE Tax Law, and it requires detailed documentation. Proper documentation helps to identify the consumption tax that needs to be paid on time. It reduces the tax burden. The maintenance of VAT records is mandatory in the UAE.

vat accounting services uae

VAT Accounting Services in Dubai, UAE

VAT accounting is a process related to the VAT section of a business concern. It is important for every taxable person to maintain a book of records under UAE Tax Law, and it requires detailed documentation. Proper documentation helps to identify the consumption tax that needs to be paid on time. It reduces the tax burden. The maintenance of VAT records is mandatory in the UAE.

Different types of VAT

There are two types of VAT: -

1.The Input VAT

The Input VAT is charged on goods when purchased or on services when offered. If you are a registered buyer with the FTA, the VAT amount will be deducted from your settlement.

2. The Output VAT

Output VAT is charged on the sale of goods and services delivered. It is calculated directly. 

The VAT rate in the UAE

VAT is charged on different category basis as per the following rate in the UAE:

  • Standard Category

Automobiles, electronic items, fuel, jewellery, food & beverage, apparel, entertainment services, cosmetics, restaurants & hotels, construction, commercial leasing, etc. attract the standard rate of 5% VAT.

  • Zero Category

The export of goods or services, international transportation of goods and passengers, supply of certain means of transport, supply or import of investment precious metals with 99% purity and more, residential buildings, buildings used by charities, certain education services, and certain healthcare services attract a Zero rate VAT.

  • Exempted Category

Financial services, certain residential buildings, bare land, and local passenger transportation are exempted from VAT charging.

VAT Registration in Dubai 

A company should register for VAT if the taxable supplies and imports exceed AED 375,000. A company can register voluntarily if the amount exceeds AED 187,500. 

Important Documents for VAT Accounting

A business should submit the following documents in order to process VAT Accounting. 

  • Accounts of all supplies and Imports of Goods and Services.
  • All Tax Invoices and alternative documents related to Goods or Services received and issued
  • All Tax Credit Notes and alternative documents received.
  • All Tax Credit Notes and alternative documents issued.
  • Accounts of Goods and Services purchased and for which the Input Tax was not subtracted.
  • Accounts of exported Goods and Services.
  • Accounts of adjustments or corrections made to accounts or Tax Invoices.
  • Tax due after the error correction or adjustment.
  • Annual Account details
  • General Ledgers
  • VAT Ledgers, Purchase daybooks
  • Credit and Debit notes, etc.

A penalty of AED 10,000 will be imposed on an individual or business who fails to keep proper records of the transactions made. 

Why we need proper Accounting System for VAT

  • Mandatory requirement by law

Proper VAT accounting is mandatory for every taxablebusiness registered with the FTA.

  • Ensures easy Tax Returns

VAT accounting ensures the access of all the necessary documents relating to tax filing at one place. This can make the tax return filing easy. 

  • Helps the expansion to be flexible

VAT accounting provides the details of the estimated total amount to be paid as taxes. This will help the management to set the budget if it wants to expand the business. 

  • Serves as a checklist

VAT accounting serves as a checklist that allows the business and the concerned authorities to check whether all the tax-related documents are submitted or not, as it consists of the names of the materials to be correctly filled and submitted. 

  • Reduces the burden of Tax Audit

Proper accounting and financial statements to ensure the business keep all the data related to all the transactions made by it. It helps the company from future tax audit or inspection from the authorities to conduct the assessment without much burden.

  • Familiarises with new VAT Related Schemes

VAT accounting can create awareness among the companies about how to get the benefits issued by the authorities' from time to time. 

  • Enhances the National Revenue Growth

VAT accounting is a process which calculates and registers the total amount of Taxes to be paid by a company to the government. The proper tax filing will surely fill the coffer that will boost the national growth.

  • Decreases the Risk of Penalties

VAT accounting ensures that the company is complying with all the rules and regulations set by the authority. Proper tracking and payment to FTA reduces the risk of getting administrative penalty by the government.

Application of Reverse charge mechanism in Accounting System

Reverse Charge Mechanism is a process under which the accountability of paying tax to Government shifts from seller to buyer. This mechanism is applied on the import of goods and services into UAE. Collection of proper documents relating to import of goods will be easy to reclaim the tax through RCM. Booking RCM in system will have accurate VAT 201 form, and the VAT filing should match with the Internal VAT report.

Thus, as a recipient or buyer of goods or services under reverse charge mechanism, the following responsibility needs to be settled:

    • All the customs documents and its supported invoices
    • Account the value on which tax needs to be levied
    • Determine the VAT due on reverse charge supplies
    • Pay VAT to the government
    • Claim Input Tax, if eligible.
  • Maintain the records such as invoice and other documents to corroborate the tax payment and input tax claim

Accounting Entries for Booking the Tax in the system

  • For Purchase/ Expenses

Purchase Account DR

Input Tax Account DR

Supplier Account CR

  • For Sales Accounts

Customer Account DR

Sales Account CR

Output Tax CR 

  • Output Tax - Input Tax = Net Vat Payable Account

Net vat Payable Account DR

Federal Tax Authority CR

CDA & VAT Accounting ServicesIn Dubai 

CDA is a VAT consultancy firm in Dubai that provides accurate accounts on taxation and accounting tasks. We will take care your VAT Accounting and Bookkeeping tasks and save you from facing any penalties and fines in your business. 

CDA provides the following VAT Accounting services to the business community:

  • We do the VAT Registration & tax filing process
  • We help you in VAT planning
  • We do the book of records maintenance
  • We maintain your balance sheet carefully
  • We maintain your Profit & Loss account properly
  • We train you on VAT laws in UAE
  • We interpret and classify tax group for you
  • We help you to process with accurate and quick tax filing 
  • We update you with FTA’s new legislation and rules
  • We provide unique advice on financial and legal issues
  • We provide advice on VAT rates
  • We help you maintain the requirements for Reverse Charge Mechanism
  • We train you on VAT related accounting for Dubai Expo 2020

CDA has been dealing with the vital process of accounting and taxation for various clients engaged in numerous businesses in UAE. Our professional experts examine the nature of your business, deal with your VAT issues and makes it easier to handle. With our adept team, we provide quality consultancy services to SMEs, individuals as well as to the big corporates in the field of CFO Services, Auditing Services, Accounting & Bookkeeping Services, Accounting Software services and Due Diligence Services.

If you have any doubts regarding VAT Accounting process or about your current business, feel good to discuss with us. CDA is there for your support! 

Our experts will give you one-hour Free Consultation to keep your uncertainties away!

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