In the past few years, several small and medium enterprises have established their business operations in the United Arab Emirates. They have been struggling with their operational issues that value-added tax was implemented in the region. It was a new form of the tax system which caused confusion and fear to the SMEs.
Although, it has been around two years since the implementation of VAT in the United Arab Emirates. Still, there are a number of points of concern and confusion which make the business parties face penalties and fines. They need to pay better attention to their operations and functionality, in addition to complying with requirements to avoid penalties.
This article will help you explore common mistakes most of the small and medium enterprises make related to VAT filing due to which they end up facing negative consequences.
Top 5 Mistakes SMEs Should Avoid While Filing VAT
Value-added tax is considered one of the most complex taxation systems as it requires a lot of work on the part of taxpayers. However, all of this pays off in the end, as they earn more profit and ensure a boost in their business activity. All of this is only possible when they manage VAT filing efficiently and fulfill other conditions on time.
The following are some common mistakes that the small and medium enterprises should avoid while filling for VAT in the UAE.
1. Poor Record Maintenance
Proper record maintenance is one of the most important conditions that small and medium enterprises must fulfill while filing for VAT in the United Arab Emirates. Most of the companies only keep the record of essential documents that they think they will need in the future.
On the other hand, some of the SMEs do not pay any heed to record maintenance and face penalties and fines when they fail to comply with VAT filing requirements. There are some considerate firms as well who are aware of their responsibility. They acquire the help of the best VAT consultancy in Dubai to look after and manage all the records in order to complete the VAT filing process efficiently.
2. Mistakes in VAT Calculation and Payment
The second most common mistake committed by most of the SMEs in the UAE is that they miscalculate and pay the tax amount to the authorities. VAT does not apply to different goods and services in the same way, therefore; there is a different price for all.
The SMEs often calculate the general amount and apply it to all goods and services. VAT calculation requires proper knowledge of the taxation system. The lack of knowledge and expertise can only add loss, instead of earning the profitability promised by VAT.
3. Hiring Inappropriate Resources
Another common mistake committed by the SMEs related to the VAT filing process is hiring the inappropriate resources. These resources can in terms of staff to look after the VAT compliance process or acquiring goods and services.
All of this is related to their poor planning regarding the fulfillment of VAT requirements. They need to accept the fact that such activities are hurting their credibility in the market, which can also make them lose their clients. So, fulfilling their responsibility efficiently is crucial for earning profit.
4. Not Issuing Valid Tax Invoices
The SMEs are liable to provide the valid tax invoices to the authorities at the time of VAT return filing. These invoices are the record that they have paid a certain amount and can get back the mentioned amount.
However, not issuing proper tax invoices does not only make the lose the amount; they also have to face the penalties. It can in the form of a fine or other operational dysfunctionality.
5. Misunderstanding of VAT Law
Even after a long period of its implementation, VAT is still not properly understood by many business organizations in the region. This is another common mistake committed by the SMEs that they misunderstand the VAT law and try to follow the regulations according to their understanding.
If you are making the same mistake, you must have faced penalties and fines. However, you should not repeat the same mistake, even if you are unable to understand the law. You can hire the service of best VAT consultancy in Dubai to look after all the necessary requirements and fulfill them on your behalf and maximize your credibility, as well as profits.
Fulfill VAT filing requirements to earn more profit!
Earning more profit and establishing their credibility in the market are the sure short ways of progress for the SMEs. It is the high time that your firm starts relying on the professional support to better manage the VAT taxation issues, instead of earning loss. You will also be able to pay stress-free attention to your business operation while handing over the complex matters to professionals.