New VAT and corporate tax laws in the UAE bring big changes for construction firms and equipment traders. As tax advisors, we help make following the rules easy. This guide explains everything in a simple way.
What is VAT?
VAT stands for Value-Added Tax. It’s a 5% tax on goods and services. When companies buy things like cement or tools with VAT, they can get that amount back. This is called “input VAT”. Firms also charge 5% VAT on sales, called “output VAT”.
At the end of each quarter or year, input VAT is subtracted from output VAT. The difference shows tax owed. For example, a company’s output VAT is AED 100,000 and input VAT is AED 80,000. So the tax it must pay is AED 100,000 – AED 80,000 = AED 20,000.
Filing VAT Documents Regularly
All construction and equipment businesses must send VAT returns usually each quarter. If a period ends in January, the return is due by end of February. Records like receipts must be kept for 5 years in case of audit. Missing dates risks fines. Outsourcing filing ensures on-time submission to tax offices.
Calculating VAT on Projects
For builders, VAT rules get confusing with subcontractors involved. Contracts must clearly state VAT. Firms calculate VAT on total cost, not individual bills. If goods are imported or subcontractors hired, related input VAT can be claimed back too.
Registering for Corporate Tax
All companies must sign up for income tax by June 2024. Information like ownership details and business type is provided. Tax experts help pick the right company structure during registration for maximum benefits.
Keeping Proper Account Books
Government inspects some companies’ records yearly. Invoices, receipts and capital changes must be digitally recorded all year. Accounting software makes this simple. Outsourcing bookkeeping saves time and mistakes.
Calculating Taxable Incomes
Corporate tax only applies to annual net profit. Total income is reduced by normal costs like wages and rent. Capital or entertainment expenses follow special deductions. Tax advisors ensure only permitted deductions are taken.
Submitting Income Tax Returns
The first return is due within 3 months of a firm’s year-end. Profits are estimated ahead to pay any dues on time. Even exempt firms must submit a nil return. Outsourcing filing guarantees on-time submissions to dodge penalties.
Common Queries
Records for a Tax Inspection?
Documents showing incomes, costs and taxes paid for 5 years like receipts and books must be digitally stored.
Calculating Taxable Profits
Revenue minus bills and allowances written in tax legislation. Consulting experts clarifies proper deductions.
Penalties for Mistakes
Errors risk fines from AED 500 to 20,000 imposed by authorities. Outsourcing prevents issues.
Past Non-Compliance?
We help firms submit delayed filings or review old records to solve problems painlessly.
Conclusion
Following VAT and corporate tax guidelines correctly is important but complex. We simplify compliance through personalized services and advice from professionals. Contact us for assistance catered to your business needs.
FAQs
A. VAT returns must typically be filed before the end of the month following the tax period.
A. Input VAT can only be claimed up to 5 years from the date of purchase.
A. Yes, if a company’s input VAT exceeds output VAT, VAT refunds are permitted as per procedures.
A. Regular notifications are issued by UAE tax authorities in case of any amendments to guidelines.
