How non-compliance with VAT could prove costly
It is imperative that business houses align their accounting and IT systems to be adherent with VAT requirements
Value added tax (VAT) is to be implemented in the UAE from the first of next month which is hardly a few weeks away. Surprisingly, a large number of small and medium enterprises (SMEs) in the UAE have not completed their VAT registration with the Federal Tax Authority (FTA). Some have the wishful notion that VAT may be postponed, others are not prepared and some do not have the records required for registration. This state of affairs is predominantly seen among SMEs who account for about 80 per cent of total business entities in the UAE.
Can a business entity afford to shy away or close its eyes to the current demand? No. Though we are living in a country where the rulers and government are very benevolent, non-compliance is not tolerated. The FTA has framed penalties for companies and individuals who do not comply with the laws and rules.
There are various types of non-compliance which will attract penalties. Entities which are within the VAT threshold will face a steep penalty of Dh20,000 if they fail to register within the specified time. In line with the general practice of tax authorities around the world, each non-compliance will attract penalties for the first offence and repeat offence will see significantly higher penalties and in some cases even lead to imprisonment.
Come January 1, 2018, business entities in the UAE who are required to register for VAT would have to ensure that their invoices are inclusive of VAT and their tax registration number (TRN) is disclosed.
Companies should try to avoid such penalties not only because it will be an unnecessary financial burden but it will also lead to disrepute with the FTA. Precaution is better than cure. Entities may also face penalties unwittingly as the management may be unaware of the requirements and may not have adequately reported. For instance, if your systems are unable to capture the required data for filing returns, then the filing will be flawed and might lead to a penalty. A disregard to file VAT registration would mean the entity will not be able to recover and get a refund of its input credits (VAT paid for supplies).
The list of penalties in the box is only narrative and not exhaustive as there is penalty for each non-adherence. It is imperative that business houses align their accounting and IT systems to be adherent with VAT requirements. The failure of a person to keep required records and other information may lead to a penalty of Dh10,000 for the first time and Dh50,000 in case of repetitions.
The writer is senior partner at Crowe Horwath UAE. Views expressed are his own and do not reflect the newspaper's policy.
India attracted a record FDI flow of $67.54 billion during the first... READ MORE
The symposium is hosting 38 engaging sessions and workshops that will ... READ MORE
Total merchandise exports from India stood at $187.11 billion in H1. READ MORE
The market will have an eye on the global data to get further... READ MORE
Suicide bombing killed 47 on Friday READ MORE
David Amess's killing on Friday is the second killing of a politician ... READ MORE
Working to relocate relatives who wish to leave country to the States,... READ MORE
Winds may cause blowing dust READ MORE