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UAE VAT-Maintenance of accounts and records

An overview of records to be maintained by a taxable person

Preface

Introduction of VAT has made maintenance of Accounts and records compulsory to comply with the provisions of Federal Tax authority. Also the law has requirements to keep the records for specific period. It is the responsibility of each tax person to maintain proper records as the Authority may perform a Tax Audit on any Person to ascertain the extent of that Person’s compliance with the provisions of this Law and the Tax Law.

For non availability of of the specified records a taxable person will be liable to pay penalties and fines.

Records to be maintained

  1. Records of all supplies and Imports of Goods and Services
  2. All Tax Invoices, credit notes and alternative documents related to receiving Goods or Services
  3. All Tax Invoices, credit notes and alternative documents issued
  4. Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
  5. Records of Goods and Services purchased and for which the Input Tax was not deducted.
  6. Records of adjustments or corrections made to accounts or Tax Invoices
  7. Records on transactions based on Reverse Charge Mechanism

Other Records to be maintained for Tax Purpose

Basic Details based on TAX Filing

  1. Due Tax on Taxable Supplies
  2. Due Tax on Reverse Charge Supplies
  3. Recoverable Tax for supplies or Imports(Claimable Input Tax)
  4. Correction or adjustment made to Taxable Supplies as well as Recoverable Tax

Categorised Details based on TAX Filing

  1. Tax on capital goods
  2. Tax based on profit margin – compounding scheme
  3. Zero tax or exempted transactions
  4. Transactions between Designated Zone and Mainland
  5. Domestic Taxable and unregistered transactions

Each Transactions shall have the following contents

  1. Customer (or) Vendor wise
  2. Product/Service
  3. Quantity/Volume
  4. Price
  5. Nature of tax
  6. Taxable value
  7. Tax amount
  8. Tax registration number of both supplier and customer
  9. Type of exemption (if any)
  10. Type of levy
  11. Capital goods tax (if any)
  12. Emirate Wise Supply

Records pertaining to specific Emirate

To identify the supply taking place in an emirate, following points should be considered:
  1. Where goods are collected by recipient from a physical place or a location or service is performed at a physical location then it will be deemed that supply has taken place in the emirate where this physical location is situated i,e, origin based concept.
  2. In cases other than above it shall be in the emirate where recipient has his place of residence based on the destination based concept.
  3. In case of delivered goods, it shall be the emirate where delivery has occasioned to the recipient.
  4. In any other case, place of residence of supplier.

Documents that has to be maintained based on business activities

  1. Balance Sheet & Profit and loss
  2. Fixed asset records
  3. Inventory records at the end of any relevant tax period
  4. Other indirect Expenses

Period for maintaining records

All the above mentioned records shall be maintained for specific periods as mentioned below:

  1. Normal Cases : 5 Years
  2. Capital Assets or Fixed Assets : 10 Years
  3. Real Estate Business : 15 Years.

Failure to keep the required records

  1. FTA may disallow the input tax recoverable
  2. Also additional Tax may be levied
  3. Penal Consequences:

First Time Failure : AED 10,0000
Repetition of Failure : AED 50,000
As per Cabinet Decision No.40 of 2017 under the Table of Violations and Administrative Penalties

Conclusion

Entities thus has to warrant changes in the ERP and the accounting software once registered for TAX. It is necessary for every business to understand their responsibility of maintaining the prescribed documentation strictly.

So instead of the pursuing the documentation compliance as an additional burden of expenses to the business it should be treated as a measure of avoidance of unnecessary enormous penalties.

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