Perform Pre-audit health check & assess VAT Penalty
The FTA has been informing companies that they will be audited five working days after the date of the email sent to them for the year Jan 1st to April 30th, 2018, and May 1st to July 31st, 2018 tax periods.
Businesses must get ready and ensure that their legitimate expenses, appropriate documents, revenue are all in place and accounted for. Due tax need to be calculated and paid periodically.
VAT Payments and heavy penalties that heavily affect the business’s cash flow statements can be unpleasant for small businesses. They will suffer if they don’t set aside enough funds for their payments.
Audit can be intimidating for anyone who isn’t prepared for it. The FTA will usually notify the auditee in advance, that is, 5 business days. Although, in certain cases like Suspected Tax Evasion or if there is a reason to not notify as it may deter the audit process, the notice will not be given.
The tax audit will be conducted at the business’s place or the FTA’s office. The audit is typically done in FTA’s business hours. The tax auditor in charge of performing the audit should be given the required assistance from the auditee’s side, which may be their tax agent or legal representative.
The following are the conditions that the taxable company must comply to on receiving the tax audit notice;
- The audit grounds need to be accessible.
- Pertinent records of tax, invoices, books of accounts etc. are accessible.
- Pertinent staff should be available.
- Original copies of the documents should be present.
- The Audit FAF File for Auditors need to be generated.
It is the business’s responsibility to generate Audit file in FTA designed FAF file format and respond to the FTA quickly. The business’s VAT accounting software need to capable of doing so.
Once the audit is completed, the FTA will communicate the results to the auditee. If the audit’s results point to any of the following cases, then tax assessment will be issued.
- Failure to apply for registration within the time frame specified by the VAT law.
- Failure to submit a tax return within the time fame specified by the Vat Law.
- Failure to settle the payable tax stated as such on the VAT return that was submitted within the time limit specified by the Tax Law.
- Submitting an incorrect VAT return.
- The registrant failing to account for Tax on behalf of another person when he is obligated to do so under the Tax Law.
- The shortfall in VAT payable as a result of tax evasion.
According to the Cabinet Resolution No. (40) of 2017 on Administrative Penalties for violations of Tax Laws in the UAE, In the event of failure to provide the required records or assistance for tax audit conduct, applicable penalties may be levied on the tax payer.
How to prepare for an audit check:
- Check the timely submission of VAT returns and ensure that you have performed the reconciliation when accounting for the input and output VAT.
- Gather all original documents like income and expenses labelled and organized by tax year.
- All relevant documents should be reconciled with bank records and available to the auditor.
- Tax Invoice requirements need to be met as the payments made should be based on an original invoice marked ‘Invoice’ and supplier VAT registration Number is mentioned on the invoice.
- Ensure that the goods/services qualify as taxable supply and VAT is properly calculated.
- Ensure that the Sales Order Processing system is automatically generating correct VAT values by reference to the customer or type of goods or service, country and designated zones as per VAT Law.
- Check VAT calculation under Capital Asset Scheme for acquisition and disposal of capital assets and/or improve transactions processed during the period.
- Ensure the accuracy of your VAT calculations on Entertainment and Business expenses.
If all the above considerations have been met, the smoother the audit process is for the auditor.
If you are charged with a penalty and don’t agree with the decision, stay patient as you can file for an appeal.
VAT Experts at Executive Business Solutions are committed to providing the best VAT Advisory Service in the UAE to clients in compliance with the rules and regulations of VAT in the UAE having their international experience in Taxation.
MANDATORY DE-REGISTRATION AS PER FTA REGULATION
VAT-registered companies with a taxable supply of less than 187,500 in the past consecutive 12 months, are to de-register on or before January 20, 2019. Failure at doing so will result in the company being charged with a penalty fee of AED 10,000.
According to the conditions specified in the Cabinet Resolution No. (40) of 2017, a registrant can apply for Tax de-registration if: –
- The registrant stops making taxable supplies.
- The value of the taxable supply for 12 consecutive months is less than the Voluntary Registration Threshold of AED 187,500. The registrant must meet the condition specified in Clause (2) of Article (17) of this Decree-Law. An exception applies, if the total value of the taxable supply in next 30 days, will be more than the Voluntary Threshold Limit of AED 187,500.
For a VAT-registered company to De-register as per law, their taxable supply must consist of zero-rated supplies, imports or incur costs. Exempt or out-of-scope supplies are excluded from this; the total value of the taxable supply must also be less than AED 187,500 in the past 12 consecutive months.
The process of De-registration comprises of: –
- The application for De-registration needs to be done within 20 business days.
- All administrative penalties and due tax have been paid and tax returns have been filed.
- Once the application for de-registration has been approved, the registrant’s company will be de-registered from a date decided by the FTA or the last day of the tax period.
- Once the de-registration is complete, a notification will be sent to the registrant within 10 days after the application is approved.
De-registration can also be done online over the following steps: –
On your dashboard, click the ‘De-Register’ button on ‘De-registration status’.
- Input the reason for De-registration and the date from which you require it done.
- Provide other relevant information to support your application and click ‘Submit’.
- Once you have received the approval from FTA, you will be notified of the results accordingly.
VAT Experts at Executive Business Solutions are committed to providing the best VAT Advisory Service in the UAE to clients in compliance with the rules and regulations of VAT in the UAE having their international experience in Taxation. The Tax team at Executive Business Solutions is professionally equipped with relevant industry experience from different ends of the globe.
The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals.
The UAE on Monday announced services fees and fines for non-compliance of value-added tax (VAT) laws as the country heads towards implementation of the consumer-focused taxation system from January 2018.
The regulations covers individuals, companies, tax agents and their legal representatives who come under the gambit of this new VAT regulations. The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals.
As per the new regulations, if the person fails to keep required records and other information specified in the laws will be fined Dh10,000 in the first instance and Dh50,000 in case of repetition.
The law further states that if the person fails to submit data, records and documents related to tax in Arabic to authority when requested, he would be penalised Dh20,000.
The UAE will implement 5 per cent VAT – which is one of the lowest in the world – from next year on a host of goods and services as part of the GCC-wide agreement. As per the UAE regulations, companies that provide goods and services with annual turnover of Dh375,000 or higher will be subject to VAT. While businesses with taxable supplies below Dh375,000 and above Dh187,500 will have the option to register. The UAE aims to raise Dh12 billion through VAT collections in the first year and Dh20 billion in the second year. Analysts and economist believe that the VAT will increase inflationary pressure in the country.
As part of the GCC deal, Saudi Arabia will also join the UAE from January 2018 while other Gulf nations will jump into the bandwagon at a later stage.
A press statement issued on Monday said the UAE Council of Ministers adopted Cabinet Decision No. 39 of 2017 on fees for services provided by the Federal Tax Authority and Cabinet Resolution No. 40 of 2017 on penalties for violations of tax laws in the UAE.
“These decisions bring an added layer of transparency to the Authority’s relationship with its customers,” said Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance. “This, in turn, provides extra incentive for stakeholders and all concerned parties to abide by tax regulations.”
“All customers can refer to the official Directory of Services Fees to know what is required of them to be in compliance with tax procedures,” Sheikh Hamdan bin Rashid explained.
Thomas Vanhee, founding partner, Aurifer Middle East Tax, said: “After having opened the possibility to VAT register in the UAE and after the introduction of excise taxes on October 1, 2017, the UAE government has now decided on the applicable fees and penalties for non-compliance with the VAT and excise tax legislation. This complements the Federal Tax Procedures Law and its Executive Regulations. These laws already give much power to the UAE’s Federal Tax Authority. The considerably high penalties applicable will now additionally give the FTA an important instrument to deter taxpayers from non-compliance.”
Vanhee elaborated that the penalty framework is very strict.
“This can be explained by the fact that the same penalties apply to excise tax and VAT. In mature jurisdictions penalties on excise goods, such as tobacco, are also high, since they are very fraud sensitive goods. Penalties for VAT offences though are usually lower and provide for a framework in which voluntary disclosures are encouraged by automatically waiving penalties for tax payers coming forward,” Vanhee added.
The fine for not registering is Dh20,000, which is double the fine applicable in Saudi Arabia, he said, adding that if the tax payer does not pay his taxes due, after one month a daily penalty applies of one per cent. In the oldest jurisdictions in the EU which have implemented VAT and have a relatively limited VAT gap, the late payment penalties usually vary between 0.4 and one per cent per month – with exceptions up to 2.75 per cent. In case of an error in the voluntary disclosure by the person/taxpayer, it will result in Dh3,000 fine for the first time and Dh5,000 in case of repetition.
But in case of failure of the taxable person to voluntary disclose errors in the taxable returns will also incur a fine of Dh3,000 for the first and Dh5,000 for repetition.
According to Federal Tax Authority, tax registration service and issuance of e-tax registration certificate will be free of charge but an attestation will incur a fee of Dh500. However, tax agents will have to pay Dh3,000 fee for registration and renewal for three years.
According to FTA, registration and renewal fee for an accounting software provider will be Dh10,000 for one year, whereas registering a Designated Zone will cost Dh2,000 per year.
However, there will be no service fee for registering a warehouse keeper or issuing an electronic warehouse keeper registration certificate. But an official printed certificate will cost Dh500.
Via: Khaleej Times