What Are the Records to be Maintained Under VAT in UAE?

Businesses in the UAE with a certain annual turnover threshold must register for VAT and file VAT returns regularly. Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (CT Law) requires businesses to maintain records under VAT in the UAE. Businesses are obliged to maintain records for a 5-year period after the end of the tax period it is related to. The records under VAT in UAE include tax invoices, sales and supplies, accounting records, etc. This article gives detailed information regarding the records maintained under VAT in UAE.

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What is VAT in UAE?

Value Added Tax (VAT) in the UAE is a consumption tax implemented in 2018. It's applied to most goods and services at a standard rate of 5%, with some exemptions and zero-rated supplies. Businesses that meet a specific revenue threshold or operate in designated Free Zones must register for VAT. They are then responsible for collecting VAT on taxable supplies, claiming input tax credit on purchases, and submitting regular VAT returns to the Federal Tax Authority (FTA).

Importance of Maintaining Accurate Records

Maintaining accurate and complete VAT records is crucial for several reasons:

• Compliance with UAE VAT Regulations: Proper recordkeeping ensures businesses comply with the FTA's requirements, minimizing the risk of penalties for non-compliance.

• Accurate VAT Calculations: Complete records facilitate accurate calculation of input tax recoverable and output tax payable, resulting in correct VAT returns.

• Efficient Tax Return Filing: Having organized records streamlines the process of filing VAT returns on time and avoiding delays or errors.

• Supporting Audits: Detailed records provide evidence to support VAT calculations during FTA audits, reducing the risk of assessments or penalties.

List of Records to be maintained under VAT in UAE

Businesses registered for VAT in the UAE must maintain specific records for a minimum period of 5 years following the end of the tax period to which they relate. Records related to capital assets like machinery must be maintained for 10 years after the end of the tax period to which they are related. And the records related to real estate need to be maintained for 5 years. These records can be electronic or paper-based, but they must be readily accessible to the FTA upon request. Here's a breakdown of the key record categories:

Tax Invoices and Credit/Debit Notes

• All tax invoices issued and received for taxable supplies of goods and services must be retained.

• These documents should include details such as:

• A clear indication of being a "Tax Invoice"

• Supplier and customer names, addresses, and Tax Registration Numbers (TRN)

• Date of issuance

• Description of goods/services supplied

• Unit price, quantity, and total invoice amount

• Applicable VAT rate and amount

• Any discounts offered

• Exchange rate (if applicable for foreign currency transactions)

• Credit and debit notes issued to adjust errors or cancellations in tax invoices must also be kept.

Purchases and Expenses

• Records of all purchases and expenses incurred by the business, including those related to non-taxable supplies or exempt goods/services.

• This category encompasses:

• Receipts and bills for purchases

• Bank statements and other payment records

• Customs documents for imported goods

• While VAT may not be recoverable on all purchases, these records are crucial for calculating the net VAT liability.

Sales and Supplies

• Detailed records of all sales and supplies made by the business, whether taxable, exempt, or non-taxable.

• This includes:

• Sales invoices or receipts

• Delivery orders and contracts

• Customer details and TRNs (if applicable)

• These records help determine the total output tax due on taxable supplies.

Accounting Records

• Standard accounting records, including:

• General ledger

• Sales and purchase ledgers

• Cashbook journals

• Fixed asset registers

• Inventory records

• These records provide a comprehensive overview of the business's financial activities and support the VAT calculations.

Records Related to Specific Transactions

• Businesses may need to maintain additional records for specific transactions, such as:

• Reverse charge mechanism transactions (where the customer is liable for VAT)

• Exports of goods and services (zero-rated supplies)

• Disposal of assets or goods used for private purposes

• Adjustments and corrections made to tax invoices

• These records ensure accurate VAT treatment for various transaction types.

Conclusion

Maintaining proper VAT records is essential for operating a business in the UAE. By understanding the types of records required, their retention period, and the importance of accurate recordkeeping, businesses can ensure compliance with regulations, minimize tax liabilities, and streamline their VAT return filing processes. Implementing a robust recordkeeping system and adhering to best practices can significantly contribute to a business's success in the UAE's VAT environment.

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