Businesses in the UAE commonly make tax-related mistakes such as failing to file the appropriate forms and payments on time, underreporting income and underestimating taxes owed, mixing personal and business expenses, poor record-keeping, and not taking the correct deductions. To avoid penalties and fines, businesses should stay organized, keep personal and business finances separate, reconcile accounts monthly, and seek help from a regulated tax agent to navigate filing requirements and manage their tax obligations properly.
2. Int.
Everybody makes mistakes; however, it should never
happen on your business taxes. We’ll help you make
sure you avoid the most common mistakes most
businesses make when dealing with taxes in UAE.
3. Fail tosendorFile
theappropriate
formsand
payments
Depending on the business’ legal structure, whether or
not the business has employees, and the kind of
industry it is in, it is required in filing and sending
several different forms to UAE Federal Tax Authority
or FTA.
Your business may be required to file quarterly or
annually. If you choose to hire a regulated tax agent in
Dubai to help you handle your tax affairs, you will be
reminded of the payments and forms that are required
by local tax authorities. You can also have the tax
specialist set up a calendar for you, so you know exact
what is due and when. UAE’s tax authority publishes a
calendar for taxation every year listing all of the due
dates for taxable entities.
4. Underreporting
and
underestimating
If you are filing as a self-employed, a partner, a sole proprietor, or
limited liability company, then you are most likely mandated to
make quarterly payments for tax based on the estimated tax bill
of the business you are running for the year. Local authorities
know you won’t be able to guess the actual amount; however, it
wants you to provide a pretty close estimate. Otherwise, you’ll be
facing penalties and fines for underpaying and underestimating.
If the FTA believes that you are being unreasonably careless or
negligent in reporting the income of your business or if you’ve
understated the amount that you owe to the tax authority
substantially, then you’ll be imposed with penalties plus you will
get audited. Mistakes such as these are willful compared to simple
math errors; however, you should strive in being scrupulously
honest and accurate in reporting.
If the FTA finds an attempt in defrauding it intentionally, you
will be facing criminal fraud charges and there is a high chance
for your business to get shut down.
5. Mixingpersonal
andbusiness
expenses
It is very easy for a business to get expenses mixed, most
especially when you are new in business or you are self-
employed. However, the FTA has strict rules related to
VAT in UAE, most especially on commingling funds.
Business-related expenditures are the only ones that are
deductible from business income for VAT purposes. The
only way for you to make sure you don’t mix up business
and personal expenditures is by keeping your finances
entirely separate.
This means you need to open a different bank account for
your business, plus you need to utilize a business credit
when making purchases that are intended for your
company. In the event that you’re using personal assets
for your business like your home office or car, then it is
important that you retain detailed records in order to
support the deductions that you make. There is no chance
for you to make a deduction if you don’t have the
supporting documents.
6. Poororganization
andrecord-
keeping
Even for a business that does not have any quarterly VAT
return filing obligations, VAT should be not less than once
every year proposition. If you leave it at the very least
minute, this can ensure that you will miss out on the
deductions that you are entitled to just because you have
not kept track on all the spending of your business along
the way. In addition, it can also cost you a lot more when
it comes to accounting fees which you’ll have to spend in
order to get things straightened out.
Make sure that you have set up a system in place which
can help in the tracking of income and expenses. You
should be reconciling the cash flow of your business with
credit card and bank statements every single month.
There’s a lot of tax professionals in UAE that can help you
with this. In addition to providing help and guidance in
preparing your VAT return, having a tax specialist helping
you will allow you to manage your finances better.
7. Nottakingthe
correct
deductions
As for getting the deductions that you deserve, tax
authorities in UAE considers the expenses necessary
and ordinary or part of running a business. Taking
deductions for expenses that you don’t belong to your
business will invite a surprise audit from the tax
authorities. It can also come with severe penalties
should tax officers catch errors when checking your
books of accounts. Even legitimate deductions will trip
you up when they are out of proportion against your
income or to what a business of your business and in
the same industry as you are in is claiming.
If you want to avoid tax problems, the best way in
doing so is staying organized and seeking the help of
regulated tax agents in Dubai like VAT Registration
UAE. Call us today!
