Common VAT Mistakes Made by UAE Businesses

Businesses in the UAE have been managing VAT at a 5% standard rate since 2018. For those registered, correctly filing regular VAT returns is a mandatory compliance duty.

To help you maintaining compliance, here is a list of common VAT mistakes in the UAE and practical advice on how to avoid them.

1- Issuing Non-Compliant Tax Invoices & Tax Credit Notes (not compliant with FTA requirements):

Many businesses issue tax invoices or credit notes that do not meet the Federal Tax Authority’s mandatory requirements, such as missing key details or incorrect formatting.

Key matters to consider:

Always verify that tax invoices and tax credit notes include all mandatory details required by the FTA — such as TRN, date, VAT amount, and proper descriptions.

And whether the tax invoice total amount is above 10,000 AED or not, where full tax invoice layout and simplified tax invoice layout might be considered.

2- Place of Supply Determination (inside UAE, outside UAE, FZ, etc.)

Errors often occur when determining whether a transaction’s place of supply is inside the UAE, outside the UAE, or within a Free Zone, leading to wrong VAT treatment.

Key matters to consider:

This is a critical matter, and special consideration should be given to real estate related supplies including services, designated free zone supplies and movement of the goods sold, and import of goods and services into the UAE.

3- Not Charging VAT on Some Non–operational Transactions

Some entities overlook VAT obligations on certain non-operational activities, such as asset disposals or internal transfers, assuming they are outside VAT scope.

Key matters to consider:

Evaluate both operational and non-operational activities (like asset disposals, gifts, and internal transfers to branches or separate company trade license) to determine whether VAT applies.

4- Claiming Ineligible Input VAT (non-business, motors, etc.)

Businesses sometimes reclaim VAT on expenses that are not allowed under UAE VAT law, such as personal or non-business expenditures and certain motor vehicle costs.

Key matters to consider:

Only claims input vat based on correct tax invoices, and maintain payment vouchers for such invoices, and make sure the motors are not available for personal usage.

5- Emirate-wise taxable supplies reporting in VAT Returns.

Incorrect allocation of taxable supplies between Emirates is a frequent reporting mistake, affecting the accuracy of submitted VAT returns.

Key matters to consider:

Track sales and taxable supplies by the Emirate where the fixed establishment or branch is located to ensure accurate VAT return submissions, and special attention should be given to real estate supplies including those in the construction industry.

Need help understanding your UAE VAT obligations? Contact Assure Gate Tax & Accounts for expert guidance tailored to your business.