VAT Payment in UAE-Download Free UAE VAT Calculator
Download Free UAE VAT Calculator
Introduction
The inception VAT form of taxation makes it mandatory for the VAT registered entities to file returns to pay tax every quarter that is at a period of every three months. In some cases monthly. The registered entities should file the returns through online services of the Federal Tax Authority for VAT payment in UAE
Learning from the post
- Importance of VAT payment in UAE?
- Who should pay VAT in UAE?
- Calculation of VAT amount to be paid to Government?
- Download free VAT Payment Calculator
- How to pay VAT UAE-VAT Payment in UAE
- Facilities for VAT payment in UAE
- Penalty for late payment of VAT
Importance of VAT payment in UAE
As per the Government regulation all the registered entities should pay tax on or before due date for seamless operations of business. No manual payments are accepted on the desk. It is mandatory that all the companies registered under VAT should go through online process of VAT payment in UAE. This is basically adopted to avoid any kind of manual manipulations. The last date to lodge the VAT return and pay the due VAT will be the 28th of the subsequent month.Delay by any tax payee in VAT payment in UAEwill be penalized by the tax authority
Who Should Pay VAT in UAE
A company whose annual turnover is equal or above AED 375000 should be VAT registered to pay VAT under Federal Law. If the Annual Turnover is between AED 187,500 & AED 375,000/, it is optional for the company to be registered under UAE VAT law and make VAT payment in UAE Further, if it is less than AED 187,500/, the company need not register under this law and hence no payment of VAT amount.
However, for the ease of the business, supplier may not be registered if the business does not make any supplies which are eligible for 5% tax. . If exception from registration is granted, then you will not submit regular tax returns to pay VAT and you will not be able to recover input tax incurred.
Calculation of VAT Amount payable :VAT payment in UAE
Understanding key words in the calculation of VAT:
Input Tax:It means tax paid on raw material for the purpose of making the finished goods. You can reduce the tax that has been already paid on the inputs and pay the balance taxable amount. Thus, entire taxes paid are set off against the output tax liability and there is no cascading impact of taxes.
Example:Mr.X ‘s company is a manufacturer of mango juice.Raw materials required are mangoes, sugar, acidity regulators and packaging materials.
| Input Material | Input Tax Paid |
| Mangoes | AED 100 |
| Sugar | AED 75 |
| Acidity Regulators | AED 50 |
| Packaging Material | AED 50 |
| Total | AED 275 |
Once the final product is made let the tax on output be AED500
Tax to be paid by the manufacturer =AED500 – AED275=AED225
Input Tax Credit=AED275
Input Credit in VAT:
A company can avail input tax credit only if it is registered with Federal Law.VAT is charged at 5% on total value of the final goods. As vat is collected at every channel of production and distribution Government will not collect the tax upfront on the final good only. The difference amount resulting from VAT recovered on sale of final good and VAT paid at the procurement of raw material is the Taxable amount that is paid to the government.
Understanding with the formula:
VAT=Output TAX – Input Tax (Output tax being the VAT collected on sales of goods and services and Input Tax being the Tax paid on purchase of raw materials)In some cases, Input VAT might be higher than the Output VAT. In such a situation, it will result in VAT refundable which can be carried forward to the next return period and will be allowed to be utilized against your future VAT liabilities.
If tax on inputs is greater than tax on output –> carry forward input tax or claim refund
If tax on output is greater than tax on inputs –> pay balance
Understanding Calculation Of VAT with a scenario:
Mr. Y a has a textile industry, with annual turnover being more than AED375000.He spends AED 200,000 for procurement of raw materials like yarn, dye etc.
| Particulars | Tax |
| Applied on 200,000 @ 5% | Input tax is AED 10000 |
| Assuming the finished product is sold for AED 400,000 | |
| Applied 5% on 400,000 | Output Tax is AED 20000 |
| Therefore final VAT payable to Government is Output tax – Input Tax | 20000-10000 |
| VAT payable | AED 10,000 |
DOWNLOAD FREE VAT PAYMENT CALCULATOR
HOW TO PAY VAT THROUGH FTA ONLINE SERVICES IN UAE
All VAT registered businesses should make VAT return payments in the UAE through the Federal Tax Authority’s (FTA) online portal. The access to the portal is through secure login. VAT registered businesses must pay all collected VAT to the UAE government. The VAT payment mechanism accepts e-dirham, Visa, and MasterCard.
PROCESS OF VAT PAYMENT IN UAE
- Login to FTA (//eservices.tax.gov.ae) using your username and password.
- Navigate to ‘My Payments’ available in the portal dashboard.
- In the next page under ‘VAT & Penalty Payment’, the amount the taxpayer needs to pay is shown as ‘Total Outstanding Liability’.
- Below the total outstanding liability, complete the amount you wish to pay and click the ‘Make Payment’ option.
Please note that you can do partial payment. However, ensure you pay the entire amount before the due date to avoid incurring a penalty.
Note: You will need to pay older liabilities first and then the more recent VAT liabilities afterward. For example: When you make a payment, you will need to pay the VAT return liability showing as due for January ahead of the VAT liability due for February.
5.When you click on the ‘Make Payment’ option, it will direct you to the ‘Payment Information’ details. Click on the ‘Pay Now’ button to proceed with the payment. It will then direct you to the e-Dirham gateway.
6.At the e-Dirham gateway, you will be able to make a payment through either e-Dirham, Visa, or MasterCard.
7.Confirm that your transaction and the VAT payment is successful. It will then redirect you back to the FTA website.
You can view the transaction history and all payments made under the ‘VAT Transaction History’ available in ‘My Payments’ tab. This will include your transactions and payments for your periodic VAT returns. And also, any penalties that could be applicable in relation to your VAT returns.
FACILITIES FOR VAT PAYMENT IN UAE
There is also a new method of payment through bank transfer, GIBAN, introduced by FTA recently.A GIBAN is the IBAN representation of the TRN of the Taxable entity. You can use GIBAN to settle outstanding VAT and penalties. GIBAN facility can be availed as a mode of payment from 28th February, ’18.
1.GIBAN- Generated International Bank Account Number
2.IBAN -International Bank Account Number
A taxable person can process a fund transfer from certain UAE financial institutions using the GIBAN. Transfer through GIBAN will ensure timely processing of fund transfers between bank accounts.
Entities paying tax will be given a GIBAN based on the TRN (Tax Registration Number). The GIBAN will be displayed in the entity’s dashboard in the FTA e-Services portal.
VAT PAYMENT IN UAE USING GIBAN
Steps to follow for payment
1. Login to FTA portal using your account details.
- Your GIBAN will be displayed on the dashboard. Separate GIBANs are assigned for VAT and Excise Tax. Make sure to choose the right one.
2. Selection of Payment Option
- There are two payment options under GIBAN method. Online banking and through the bank branch. Select the preferred option.
3. GIBAN through Online Banking
- Tax payer can make payment through internet banking.
- Log in to online banking account. Use your GIBAN to attach FTA as a new beneficiary.
- Once the beneficiary is approved, make the transfer by visiting the fund transfer option.
- Ensure to enter the right amount of VAT payable.
- The transaction will be automatically processed upon GIBAN validation.
GIBAN Payment through Bank Branch
- Visit the branch of your bank.
- Ask them to accept the payment and provide GIBAN number.
4. Payment Confirmation
- Once VAT payment is done online/offline, visit the FTA e-Service portal and login to your account.
Click on ‘My Payments’ tab to view latest transaction appearing in the Transaction History. It takes up to 24 hours for the payment to reflect on the FTA portal.
GIBAN allows taxpayers to make VAT payment in UAE through available financial institutions existing in the UAE, it is an easy, affordable and faster method of payment.
Taxpayers can benefit through GIBAN by avoiding 2-3% fees of credit card if used for making VAT payment GIBAN ensures timely remittance of the amount to FTA.
PENALTY FOR LATE PAYMENT OF VAT
Default in VAT payment in UAE results in penalty below are mentioned types of penalty depending upon case to case basis.
- 2% of the unpaid tax immediately levied once the payment of payable tax is late
- 4% is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid.
- 1% daily penalty charged on any amount that is still unpaid for one calendar month following the deadline for payment with a maximum ceiling of 300%
CONCLUSION
The FTA has enabled easy and simple VAT return payment methods by introducing online services. VAT return payment methods include e-dirham, Visa, MasterCard, and most recently, GIBAN. Thus ensuring VAT payment in UAE on time.
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