VAT Compliance Audit in the United Arab Emirates

UAE consumers are expected to pay VAT on the purchase of most goods and services. The UAE Minister of State for Financial Affairs has stated that the UAE will implement VAT at a rate of 5% on January 1, 2018. There are some exceptions that will not be subject to tax, which may include basic food, medicine/care medical, education, etc. . Other GCC countries can also implement VAT from January 1, 2018 or January 1, 2019.

What is the reason behind the implementation of VAT in the United Arab Emirates?

The government provides public services to citizens and residents, such as hospitals, roads, public schools, parks, waste control, police and defense services, and much more. To cover the costs of its services, the government has to generate huge revenues. It can be achieved by collecting taxes. UAE is the member nation of GCC, it is very closely connected through “The Economic Agreement between the GCC states” and “The GCC Customs Union”. All the member countries of the GCC have worked together in the design and implementation of new public policies.

Threshold for VAT registration

  1. If the company’s annual turnover is less than AED 187,500, the company does not need to be registered by law.

  2. If the company’s annual turnover is between AED 187,500 and AED 375,000, registration under UAE VAT law is optional.

  3. It is mandatory for the company to register under the UAE VAT law if the annual turnover of the company exceeds AED 375,000. Special rules will apply to Real Estate Businesses and special rules are expected to apply to intra-CCG business property.

What are the necessary steps for businesses in the UAE to take?

Businesses must find out if their goods or services are subject to tax. If they are subject to the VAT law, they must register on the VAT registration platform before the end of 2017. They must make the necessary changes in financial management and accounting along with the registration of their financial transactions, carefully documenting their business income , costs and associated VAT charges. . Make the necessary changes in technology and human resources to prepare for VAT and also the changes that will be made in your accounting software. Companies have the option of hiring VAT professionals or outsourcing the work. Any taxpayer must keep the VAT invoices issued and received for a minimum of 5 years. When the government publishes the appropriate guideline and law, companies must clarify with professionals whether their goods and services are subject to tax.

VAT compliance audit

Companies in the United Arab Emirates are not sure if they have made their declarations correctly and some have filled them in incorrectly. After the implementation of VAT, companies must file their VAT returns, either monthly or quarterly, as required by the Federal Tax Authority. No error should be made when presenting the forms to the authority to avoid sanction.

At Alliott Management Consultants, our steps to perform a compliance audit are simplified in

  1. Review of accounting/bookkeeping software.

  2. Review the entry/exit tax.

  3. Periodically review your VAT returns.

  4. Checking the amount due for taxes.

For companies in the UAE, if you need consultation on VAT registration, filing and declarations, please schedule an appointment with Alliott Management Consultants by clicking here or email

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