Value-added tax (VAT) is a consumption tax used as an alternative to income tax in most countries of the world. Every business in the UAE is liable to pay VAT for a certain specified set of supplies and goods to the federal authority. Failure to comply with the VAT regulations results in penalties. On the other hand, VAT returns filing and payment according to regulations is fruitful for business processes in multiple ways.
When you comply with VAT regulations, your organization will have a better structural framework with lesser loopholes and gaps in the policies and standards. In this way, VAT helps you improve in the area of corporate governance and internal control.
This article aims to introduce you to the activities which measure up the VAT payment process from beginning till the end.
Common activities included in the VAT compliance process
In order to comply with the local regulations for your business, it is important to develop a firm understanding of the VAT process. Once you understand the requirements and the activities included in the process, you will realize the need to seek professional service of an accountant for compliance and safety from the risk of penalties.
Following is the list of activities included in the due process for any organization:
1. Data collection and record making
The first step in the VAT process is preparation. Preparation activities include the gathering of important financial data from internal sources. You need to carry out the additional analysis of information collected and maintained by the accountants. Before you can use this information and the complete dataset for further analysis, you need to ensure that the information is free of misrepresentations.
For risk-free compliance, your business data should be reflected truthfully accurately. For this purpose, you can only trust the best VAT consultancy in Dubai to make sure the data collection and record-making activities go ahead smoothly.
2. Tax records and regulations consideration
Once accountants and bookkeepers prepare the records, the next activity is to calculate the tax liability of your organization. This will also include the inputting of data prepared in the previous activities. Then, you will assign the professional auditors to prepare the mandatory records on taxes and maintain these records for further process.
In the due tax liability process, you have to keep an eye on the regulations and changes in those regulations in terms of rules and tax rates relevant for the current year. That is where your preparations phase of VAT compliance concludes.
3. Forms and document compilation
After the preparation phase of VAT compliance, you need to start off with filing activities. You have to fill and complete the forms pertaining to tax returns. This compilation may include the addition of some documentary proof as well. After compilation, you move on to the step where you submit the forms to the concerned authority.
This step can get somewhat time taking because it involves the time spent in electronic filing, besides the waiting time you have to bear at the office of the taxation authority.
4. Tax payment calculation
Once the preparation and filing activities are done, you can finally move on to the last phase of the compliance process, i.e., payment. The professional auditor will carry out the calculation of payments you have to make for VAT. For this process, the data will be extracted from accounting records and will help in the maintenance of your organization’s accounting system.
The data extracted after analysis of books and accounts prepared by bookkeeping resources will help in carrying out business forecasts. These will give you a fair enough idea of payments you will have to make in the near future. This information may even provide you an opportunity to make advance payments.
5. Making payments
Lastly, when you have calculated the amounts to be pad and reset your accounts for advanced payments if needed, you are ready to make your VAT payment to conclude the process. Now it is time for you to understand the best mode of VAT payment.
In some countries, you have the option to choose between online payment and payment to the authority office. In the UAE, the Federal authority allows you to carry out the whole VAT compliance process online with ease and no complications.
Looking forward to starting your VAT compliant business?
First things first, you need to analyze the supplies and goods that your business is associated with and ascertain whether you need to comply with VAT. If you are dealing with VAT regulated supplies, the next step is to register at the federal authority’s website and become a VTA compliant business.
Now hire a professional for accounting and auditing to comply with the regulations. Seek professional help essential because the law is involved here, and the terms and their understanding should be left to the experts only.
Make sure you do not overlook any of the steps in the due process.