Tax Accounting Services in Dubai Guide to Common Tax Mistakes that Trigger Audits

Dubai has grown to become a global hub for businesses. Entrepreneurs and companies across the world are eyeing Dubai for expanding their business. As a business, taxes are an important part of ensuring compliance and staying out of legal hassles.

VAT, Value Added Tax, introduced in 2018 is an important part of maintaining compliance in Dubai. You must ensure you file the taxes properly as mentioned by the legal parties to save yourself from audits and penalties.

That’s where you must know the most common mistakes you are likely to make and ways to avoid them. According to tax accounting services in Dubai, ensuring compliance would ensure you stay within the regulations and avoid audits. Let’s get started.

1.       The most common mistake that has been noted is incorrect VAT registration. You must determine, before even proceeding with tax regulations, if your business needs to be registered for VAT. The business that has taxable supplies that exceed AED 375,000 need to register for VAT. In case it exceeds AED 187,500, you may volunteer the registration; however, it is not mandatory for you. in case you don’t register in case you are eligible for VAT or put it off for last minute, it may raise red flags at the Federal Tax Authority. In this case, you must be prepared for their audit or enquiry into your business. you should review the taxable income for your business regularly. In case you have touched the threshold, you must register for VAT immediately. Make sure to consult VAT filing services in Dubai in case you are not aware of when to register for VAT.

2.       In some cases, businesses don’t have the proper records for the past five years. They haven’t maintained the records like invoices, receipts, tax credit notes and others needed for VAT filing properly. In case you don’t support your tax filing with proper documents, you may trigger audits from the FTA. It would immediately catch their attention. You must have an organized system that can ensure best recordkeeping. You can either go through the process manually or choose a software that can help. make sure your employees are trained on how to manage their invoices and receipts.

3.       According to the tax accounting services in Dubai, the tax invoices must meet the requirements outlined by the FTA. This includes specifying the VAT registration, breakdown of VAT and precise calculations. In case you make errors during calculation or omit certain invoices, you would be giving them reasons to conduct audit at your business. you must double check all your invoices before issuing them. make sure to use a tool that can automate this process with great accuracy to avoid these errors.

4.       When you file the VAT returns incorrectly, the FTA will be exceedingly interested in you. these errors could be due to incorrect input of the taxable supplies or failing to account for the reverse charges. You must always review the VAT returns before you submit it. You can also hire a professional VAT filing services in Dubai to help with accuracy.

5.      In case you fail to submit the VAT returns before the end of the tax period, you may be penalized for the same. It may also increase the chances of scrutiny from FTA. Have reminders that can ensure you file for VAT before the deadline.