Top 5 VAT Filing Mistakes UAE Businesses Make
Since the introduction of Value Added Tax (VAT) in the UAE, businesses have had to adapt quickly to a new regulatory environment. While many have successfully embraced the change, VAT compliance still poses challenges—especially when it comes to accurate filing. Even well-intentioned businesses can make mistakes that lead to penalties or audits from the Federal Tax Authority (FTA).
At Finance and Tax House (FTH), we’ve worked with businesses across industries and seen firsthand the most common errors. Here are the top 5 VAT filing mistakes UAE businesses make—and how to avoid them.
1. Incorrect VAT Calculations
This is by far the most common issue. Many businesses miscalculate VAT amounts on their invoices, especially when dealing with:
- Mixed-rated supplies (standard, zero-rated, and exempt)
- Discounts and promotional pricing
- Reverse charge mechanisms
Tip: Always double-check your VAT computation formulas and use reliable accounting software. When in doubt, consult a tax advisor.
2. Missing the Filing Deadline
VAT returns in the UAE must be filed quarterly or monthly, depending on your tax period, and within 28 days after the tax period ends. Missing this deadline results in automatic penalties:
- AED 1,000 for the first offense
- AED 2,000 for subsequent offenses within 24 months
Tip: Set reminders and automate your return preparation. Better yet, work with a VAT consultant to ensure you’re always ahead of the deadline.
3. Incorrect Input VAT Claims
Claiming input VAT on non-eligible expenses—such as personal expenses, entertainment, or blocked items—can raise red flags with the FTA. Additionally, failing to hold valid tax invoices for claimed input VAT can lead to penalties.
Tip: Maintain a clear separation of business and personal expenses, and retain all valid tax invoices for at least 5 years as per FTA requirements.
4. Not Reporting Reverse Charge Transactions
Businesses that import goods or services from abroad often forget to account for VAT under the Reverse Charge Mechanism (RCM). This error is particularly common in the construction and logistics sectors.
Tip: If you’re dealing with imports or international services, ensure your accounting system supports reverse charge entries and reflects them correctly on your VAT return.
5. Failure to Reconcile Sales and VAT Returns
There’s often a mismatch between reported sales in VAT returns and actual sales shown in accounting records. This inconsistency can trigger audits or penalties.
Tip: Always reconcile your VAT returns with your financial statements. A simple cross-check can prevent bigger issues down the line.
Avoid Costly Mistakes with FTH
VAT compliance in the UAE doesn’t have to be overwhelming. At Finance and Tax House (FTH), we help businesses streamline their VAT filing processes, avoid errors, and stay compliant with the FTA.
📞 Need expert help with your VAT returns?
Let our tax specialists take care of it for you. Contact Us today for a free consultation.