Taxes are one of the main sources of revenue on which the government of any country is dependent on sustaining as well as improving the financial health of the country. Previously, the UAE did not levy taxes on its residents and thus they were exempted from payments of taxes on various goods and services. But the year 2018 witnessed the roll-out of VAT charges on various goods and services sold throughout the UAE. With the introduction of VAT, the companies and brands operating in the Emirates are required to register themselves for the payment of taxes as applicable.

Even though it is the end consumers who buy goods and services at a higher price of a value-added tax of 5%, yet the companies, in the initial stage, have to give taxes on all the goods and services to the Government. However, companies can go for Reclaiming VAT on Expenses in the UAE as the Federal Tax Authority (FTA) of the UAE Government has filed a report where the registered companies or businesses can submit a VAT return request to the authority at the close of every tax period.

Steps for Reclaiming VAT on Expenses in the UAE

However, the return of the value-added taxes in UAE or the Reclaiming VAT on Expenses in the UAE depends on two factors which are known as Input Taxes and Output Taxes.

  • Input Taxes are the amount which the companies pay to the manufacturers or distributors supplying goods and services to their firm.
  • Output Taxes are the amount charged by these companies from the end consumers who buy goods and services from these companies.

Remember that only when input taxes exceed the output taxes of the same tax period, a reclaim on the VAT paid to the Government can be placed. After proper inspection and approval, the FTA considers the claim and returns the extra taxes paid by the company. Before Reclaiming VAT on Expenses in the UAE, make sure you have registered yourself or your firm as a legal service provider otherwise; you will not enjoy any benefits of reclamation procedure of value-added taxes.

Even after paying input tax, if the company’s or any other firm’s output taxes exceed the  amount of input tax, then the FTA has full authority to claim the excess tax amount obtained. The entity will have to make a payment of the extra amount earned from output tax. To understand the process of reclaiming and paying of taxes to the FTA, here is a simple calculation that demonstrates it –

  • If input tax is greater than the output tax, the FTA is liable to pay the registered user the sum derived from the difference between the output and input tax.
  • If output tax is greater than the paid input tax, then the company will have to make a payment of the sum derived from the difference between input and tax.

The entity can go for Reclaiming VAT on Expenses in the UAE by applying online at the official website of the Federal Tax Authority of UAE. Carefully read and understand all the necessary steps involved for tax returns policy before placing claim at the FTA department of UAE.

Registered businesses and companies can claim for VAT to the FTA during 28 days from the date from which the tax accounting period ends. The normal tax period calculated for businesses and company earning yearly revenue below AED 150 million is quarterly whereas, for businesses earning yearly revenue of more than AED 150 million, the general tax period is monthly. According to the provisions laid down in the Cabinet Resolution No. 40 of 2017, on Administrative Penalties for Violations of Tax Laws of the UAE, any business or company failing to claim tax return within the specified period will be considered as a violator of the applicable tax laws and will be levied with fines for the violation or negligence towards the regulations of the FTA.

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