Transaction tax

How to take control of your tax compliance and avoid penalties in the UAE

Very soon, it will be five years since VAT was implemented in the UAE. We often meet with small business owners and discuss their tax issues. During the process, we have the opportunity to review their tax compliance history.

Sometimes we discover troubling situations. The small business would be sitting on significant administrative penalties, for example, for late submission and/or non-submission of VAT returns and would be completely unaware of it. The reason – the communication details on the online services portal would be those of an outsourced service provider. As a result, the small business owner is unaware of emails/alerts sent by the Federal Tax Authority (FAC) and does not receive any telephone communication from the FTA.

Small businesses could take the following steps to monitor their tax compliance:

Step 1: Ensure access to email and phone registered on the e-services portal

FTA sends regular updates to registered taxpayers whenever their VAT returns are due during a month. Once a VAT return is submitted or a tax payment is made, an acknowledgment is sent via email and SMS. Similarly, whenever an administrative sanction is imposed, the communication is usually received via email/SMS.

However, all such communications are sent to the email address/phone number registered with AFC on the Online Services Portal.

Small businesses should ensure they have access to these emails and phone numbers. He will ensure that they receive communications directly from the ALE.

Step 2: Update email and phone on e-services portal

If business owners do not have access to email/phone, they must update the communication details on the online services portal. FTA allows a registered taxpayer to change the email address and/or telephone number initially provided when registering for VAT. The process is quite simple and quick.

In special circumstances where a business owner is not even able to access the online services portal to update the details, he can contact FTA to create new login details to access the portal.

Step 3: Periodically review the Electronic Services Portal

Even though tax compliance has been outsourced, business owners must periodically check the e-services portal themselves to keep abreast of compliance status.

Owners should specially check the “My Payments” section of the portal. The “My Payments” section contains various details about VAT declarations, tax payments and penalties imposed by FTA.

The section contains a table called “VAT Transaction History”. The “VAT Transaction History” provides specific details such as the date and time a particular tax return was submitted, when a tax payment was made and when a penalty was imposed . The table can be downloaded in Excel format and should be reviewed to determine if a non-compliance has occurred.

Businesses should regularly review their “VAT Transaction History”.

Step 4: Review submitted VAT returns

Business owners are right to focus on their operations and outsource non-core activities. However, it would be prudent to undertake a macro review of the figures reported in VAT returns. A quick review should help get a “sense check” that the numbers resonate with actual sales and purchases. Any errors in VAT returns can now be corrected no later than the VAT returns due date without incurring additional penalties. If FTA were to detect errors in the VAT declaration, significant penalties could be imposed for incorrect declarations.

Final remarks

Benjamin Franklin once said “Nothing is certain except death and taxes”. Taxes can be seen as scary like death, but should not be avoided because death is ignored. Ignoring tax compliance could not only be financially detrimental, but also impact business continuity. As we talk about success and prosperity in business, I wish you a happy and prosperous Deepavali.

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