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VAT Accounting in UAE

Maintaining proper accounting records is a fundamental requirement for VAT compliance in the UAE. All taxable persons must retain specific business records to support accurate VAT calculations, maintain transparency, and facilitate potential audits by the Federal Tax Authority (FTA). HLB’s VAT Accounting Records Compliance check is designed to help businesses establish a structured record-keeping system that meets FTA standards, minimizes compliance risks, and ensures that VAT is paid accurately.

By maintaining compliant records, your business can avoid penalties, streamline tax reporting, and ensure that VAT liabilities and recoveries are accurately reflected in your accounts.

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General requirements for VAT Accounting

What records must be kept?

A VAT registered person is required by law to keep all the following records:

  • Records of all supplies and imports of goods and services
  • All tax invoices and alternative documents received
  • All tax credit notes and alternative documents received
  • All tax invoices and alternative documents issued
  • All tax credit notes and alternative documents issued
  • Records of goods and services that have been disposed of or used for matters not related to the business, detailing the VAT paid on those goods and services
  • Records of goods and services purchased for which the input tax was not deducted
  • Records of exported goods and services; and
  • Records of adjustments or corrections made to accounts or tax invoices

In addition to the above, a VAT registered person must keep a VAT record or account which includes the following information:

  • Output tax due on taxable supplies
  • Output tax due on taxable supplies accounted for via the reverse charge mechanism
  • Output tax due after the correction of any errors or adjustments
  • Input tax recoverable on supplies or imports
  • Input tax recoverable after the correction of any errors or adjustments

In addition to the above VAT-specific record-keeping requirements, all businesses have to keep accounting records and documents that relate to their business activities. Such records and documents, include:

  • Balance sheet and profit and loss accounts
  • Records of wages and salaries
  • Records of fixed assets
  • Inventory records and statements (including quantities and values) at the end of any relevant tax period and all records of stock-counts related to inventory statements

The above requirements exist in order to demonstrate a sufficient audit trail such that a VAT amount can be traced from a source document, for example an invoice, through to the final tax return.

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For how long should Accounting records be kept?

In general, a taxable person must keep the required records for a minimum of 5 years after the end of the tax period to which they relate. Before the expiration of the 5-year term, the FTA may, however, require the person to retain the records for a further period not exceeding 4 years, in the following cases:

  • If the taxable person’s tax obligations are subject to a dispute with the FTA
  • If the person is subject to an ongoing tax audit
  • If the FTA has given a notice to the person that it intends to conduct a tax audit before the expiry of the 5-year record retention period

Where the taxable person owns real estate, the taxable person should retain the required records relating to the real estate for a period of 7 years after the end of the tax period to which they relate.

Archiving and Retrieval Requirements in UAE

Businesses do not have to keep their records in any specific way or format. However, they must be kept in a way which will allow the FTA to easily check the information which has been used to complete the tax return. Furthermore, regardless of whichever way a taxable person chooses to store their archived records, they need to be made readily available in a legible format on request by the FTA.

Our Approach to VAT Accounting in UAE

  1. Comprehensive Records Assessment: Our VAT specialists begin by evaluating your current record-keeping processes, ensuring that all necessary documents are properly maintained and meet FTA standards. This comprehensive review identifies any gaps in documentation, helping your business align with FTA expectations.
  2. Guidance on Required Record Retention Periods: The FTA mandates specific retention periods for VAT-related records, typically five years or more in certain cases. We provide clear guidance on how long each type of record should be maintained. By establishing retention policies, your business will be better prepared to meet FTA standards, reducing the risk of non-compliance penalties.
  3. Structuring a Compliant Record-Keeping Framework: Effective record-keeping requires a structured, accessible system that allows for easy retrieval of documents when needed. Our team provides recommendations on:
    • Digitization and Storage Solutions
    • Organized Filing Systems
    • Backup and Disaster Recovery

    With a compliant record-keeping framework, you can efficiently manage VAT documentation and prepare for potential FTA audits.

  4. Ensuring Compliance with FTA Audit Standards: The FTA reserves the right to audit any taxable person to verify VAT compliance. To prepare your business for potential audits, we ensure that your records meet FTA standards and are properly organized. This includes:
    • Audit-Ready Documentation
    • Consistency in Record-Keeping
    • Regular Compliance Reviews

    With an audit-ready system, you can confidently demonstrate compliance and streamline audit processes, should they arise.

  5. Advisory on Record-Keeping Best Practices: Good record-keeping practices are essential to efficient VAT management and compliance. Our team provides training and advisory support to your staff on:
    • Best Practices for VAT Documentation: Educating your team on maintaining accurate, complete, and accessible VAT records.
    • Timely Documentation Updates: Reinforcing the importance of keeping records up-to-date for real-time VAT accuracy.
    • Annual Compliance Self-Check: Encouraging periodic self-audits to ensure that all VAT records meet regulatory requirements.

    With a knowledgeable team and a clear understanding of record-keeping best practices, your business can ensure ongoing compliance and ease in VAT reporting.

Why VAT Accounting Records Compliance Matters?

The retention of accurate VAT records is not only essential for compliance but also serves as a financial safeguard for your business. Accurate records enable businesses to:

  • Pay the Correct Amount of VAT: Avoid overpayments or underpayments by accurately tracking VAT liabilities and claims.
  • Facilitate VAT Audits: An organized record-keeping system allows you to promptly respond to FTA audit requests, reducing disruption.
  • Support VAT Recovery: Maximize eligible input VAT recovery by maintaining clear documentation of all transactions and expenses.
  • Reduce Compliance Risks: Avoid penalties and fines for non-compliance by adhering to FTA-mandated record retention policies.

HLB HAMT Management Consultancy (HHMC) to Assist!

With HLB HAMT Management Consultancy (HHMC)’s VAT Accounting Records Compliance service, you can confidently navigate UAE VAT requirements, knowing that your records are fully compliant and audit ready. Our comprehensive approach to record-keeping helps minimize compliance risks, supports accurate VAT calculations, and ensures that your business is prepared for any FTA audit requests. Contact us today!

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