It is almost four years since the implementation of VAT in the UAE. Companies geared up their accounting departments to welcome the new tax laws in UAE. From VAT registration in the UAE to understanding its implications in long term business strategies in the UAE plays an important role. This article helps you know how to post VAT related accounting entries.
Any goods or services purchased and fall under the relevant scope of VAT, the record documents for the same have to be maintained for cross verification for VAT audit from FTA.
To record VAT, you will first need to create an account code for both VAT input and VAT output in the chart of accounts.
How to post VAT entries in UAE?
VAT entry on purchase of a product for AED 100 where the VAT is AED 5
Debit- Purchase or expense account AED 100
Credit- Input VAT account AED 5
Credit- Supplier account AED 100
You can check all your current liabilities at the end of the return filing period, such as supplier invoices total in the expense account and calculate the total amount. Total 5% of this amount should be recorded in the VAT input account code. These three components of checked in the trial balance will be net-zero.
The TRN number should be mentioned for generating an invoice in the UAE, and the amount must be in the AED.
The company should ensure that every line item is VAT applicable. There are exemptions for certain expenses that cannot be taxed. Hence if any such component is present in the invoice, each line item must be separately shown with the respective VAT amount.
VAT entry on invoice generated or sale of AED 100 where the VAT is AED 5
Debit- Customer account AED 100
Credit- Output VAT account AED 5
Credit- Revenue account AED 100
Also, some companies Debit Output VAT accounts as an expense.
All the revenue collected is calculated with 5% output VAT at the end of the filing period. The exact amount should reflect in the account code.
Calculating NET VAT payable to the government in UAE.
The difference between VAT paid ( Input VAT) and VAT collected ( Output VAT) is the Net VAT.
Therefore, the journal entry for the same will be
Debit- NET VAT payable account
Credit– Bank account
Five reasons why I should you looking for professional VAT accounting services?
- VAT is complex
If your company has recently registered for VAT or has come under the scope of VAT, you might want to rethink the books of the accounting changes you will put in place. Professional accounting services in Dubai or UAE can help you create a strong base for your VAT fling. Accounts services in the UAE such as Farahat and Co provide qualified chartered accountants to help companies like yours record and error-free VAT filing.
- Avoiding penalties
Once you have registered with a professional VAT accounting service, you will be assured that your VAT filings will get done on time. Missing the deadline for filing VAT reports will only invite penalties that are easily avoided with the help of consultancy services. The same input and output tax have to be calculated, which can be confusing.
- Get professional consultation
There is a lot of opportunities where the company can benefit from VAT returns and VAT reversals. However, there is a limited period to file for VAT returns. Expert audit firms in the UAE like Farahat and co can help you by providing consultation and remedial measures if you have missed benefits from VAT returns filings. They will ensure that you have all the necessary documentation in place and there is a hassle-free process for VAT filing.
- TAX Management
Audit firms in UAE are confident about VAT filings rules but are also aware that they can be changed in the future. Audit firms in the UAE offer Tax management services that take care of any change in the taxes imposed by the government. They ensure that their clients comply with the latest laws and statutory requirements by the FTA.
- Grow your business with expert finance services
Let’s agree finance is not a simple task to handle. Accountants handling the finance of your company must be qualified to do so. With accounting services and VAT services in UAE, companies can ensure they focus on their product and build better services with the support of finance experts.
Good straightforward ways to process your VAT tax returns today with experts. Experts have been the market leaders with a strong portfolio of clients across the UAE.