Any violation in the laws around VAT in UAE can result in a penalty. Businesses are advised to undergo VAT health checks to make sure they are following the federal laws. You can hire a VAT consultant to help you conduct a health check.
What is a VAT Health Check?
A VAT health check is a thorough evaluation of your business’s VAT records to make sure you’re following UAE tax laws. The goal is to spot and fix issues before they lead to penalties or audits.
A VAT health check helps you stay compliant with FTA (Federal Tax Authority) requirements, making sure your VAT processes are efficient. The VAT professionals will also give you practical recommendations to improve VAT recovery and avoid costly mistakes.
While the VAT laws apply to all businesses, companies in “Designated Zones” (specific free zones with special VAT treatment) may face more complex VAT implications, particularly on the treatment of goods and intra-free zone transactions. These entities are advised to undergo checks semi-annually, if trading heavily.
Benefits of a VAT Health Check
A VAT health check helps you spot errors in your VAT filings and processes before they become big problems. It offers the following advantages:
- Identify errors: If there are errors in your tax records, you could face fines or even an audit. A VAT health check UAE helps you find mistakes early and remedy them, helping you stay in the FTA’s good books.
- Promotes compliance: VAT health checks ensure that a business’s tax records are submitted on time without any errors.
- Improves recordkeeping: VAT health checks evaluate the reconciliation of accounts against the VAT records.
- Audit preparation: When it’s time for an FTA audit, being prepared makes all the difference. A VAT health check UAE makes sure all your documentation follows VAT control procedure.
What Happens in a VAT Health Check in UAE?
If you ever decide to undergo a VAT health check, this is the general process.
1. Initial Consultation
This step involves understanding your business model and VAT registration status. The consultants will also ask questions about your industry to take into account any sector-specific considerations.
2. Document Review
The next step is examining documents like VAT returns, tax invoices, supporting documentation, and accounting records for consistency and accuracy. Your VAT registration and filing details are compared with the documents you’ve uploaded to the FTA portal.
To prepare for a VAT health check, you will need have the following documents ready:
- Filed VAT Returns (Form 201 and supporting calculations)
- Tax invoices (Sales & Purchase)
- Input VAT records
- Bank statements & Accounting ledgers
- Contracts/Agreements (especially for zero-rated or exempt supplies)
- Import/Export declarations
- Commercial licenses and TRN Certificates
- Reconciliations between VAT returns and financial statements
3. Transaction Sampling
A VAT consultant will review a sample of sales and purchase transactions for correct VAT treatment.
4. Risk Identification
The consultant will highlight potential non-compliance areas, such as incorrect tax rates, errors in input VAT claims, or missing documentation.
5. Reporting & Recommendations
Your VAT invoices are checked to see if they’re in the correct format, and if the right VAT amounts have been applied. The consultant will then provide a detailed report with findings, risk grading, and practical recommendations for remediation.
6. Follow-up Support
The consultant provides guidance on correcting errors, amending past returns (if necessary), and implementing better controls.
Stay VAT Compliant With A&A Associate
A&A Associate provides VAT compliance services for businesses of all sizes, across the UAE. We can also provide services for corporate tax in UAE, helping you file returns and stay compliant. Book a free consultation today!
FAQ's
A VAT health check is a process to evaluate a business’s VAT procedures to check that they are in compliance with UAE’s federal tax laws.
There is no VAT on health care services in the UAE, as these goods and services are considered to be “zero-rated
Free zone companies are advised to undergo VAT health checks semi-annually, while mainland companies can maintain annual VAT health checks.
You will need your previous VAT returns, related calculations, tax invoices, bank statements, input VAT records, TRN certificates, trade license, ledgers, account reconciliation statements, and import or export declarations for a VAT health check.
