Top 5 VAT Compliance Mistakes UAE Companies Make (And How to Avoid Them)

Since the introduction of Value Added Tax (VAT) in the UAE in 2018, businesses have had to adapt quickly to a new tax landscape. Although the VAT rate is relatively low at 5%, compliance is complex and strict. Errors in VAT management can lead to financial penalties, disrupted cash flow, and even legal issues. Many companies—especially startups and SMEs—fall into common VAT traps without realizing it.

Understanding these pitfalls and knowing how to avoid them can save your business time, money, and reputation.

1. Delayed VAT Registration

The Federal Tax Authority (FTA) requires businesses exceeding the mandatory threshold of AED 375,000 in taxable supplies annually to register for VAT within 30 days. Delaying registration can lead to hefty fines and backdated VAT liabilities.

Some entrepreneurs underestimate their turnover or attempt to delay registration to avoid administrative burdens, but this is a risky strategy that rarely pays off.

2. Incomplete or Incorrect VAT Invoices

A VAT invoice is not just a receipt. It’s a legal document. It must include specific details such as:

• Supplier and customer details
• VAT registration number
• Invoice date and unique number
• Description and quantity of goods or services
• VAT rate and amount

Failure to include these can invalidate your input VAT claims and complicate audits.

3. Poor Record-Keeping Practices

The FTA requires businesses to maintain comprehensive records for at least five years. This includes purchase and sales invoices, contracts, and financial statements.

Disorganized or missing records hinder your ability to prepare accurate VAT returns and can cause issues during audits.

4. Misunderstanding Taxable vs. Exempt Supplies

Not all goods and services are treated equally under UAE VAT law. Some are standard rated (5%), others zero-rated (0%), and some are exempt.

Incorrect classification leads to inaccurate VAT reporting, which can cause fines or lost VAT recovery opportunities.

5. Filing Errors and Late VAT Returns

VAT returns must be submitted quarterly and on time via the FTA’s online portal. Common errors include:

• Missing transactions
• Incorrect VAT calculations
• Late submissions

These mistakes can lead to penalties or interest charges.

How Professional VAT Support Can Help

Navigating VAT requirements requires expertise. A professional accounting firm like Tang Accounting & Consulting helps you:

• Register for VAT on time
• Issue compliant invoices
• Keep detailed and organized records
• Correctly classify supplies
• Submit accurate and timely VAT returns

With expert support, you avoid costly mistakes and focus on growing your business.

Need help with VAT compliance? Contact Tang Accounting & Consulting to safeguard your business from common VAT pitfalls. For more information or to get started, visit our Contact Page or reach out directly at info@tangaccounting.com / +971 55 406 0153.