Since VAT was introduced in the UAE in 2018, thousands of businesses have registered and filed quarterly returns. Yet, mistakes remain common — and the Federal Tax Authority (FTA) takes compliance seriously. Errors in VAT returns can result in penalties that drain cash flow and damage credibility.
VAT is not simply a tax obligation; it is also a measure of professionalism. Accurate VAT returns demonstrate that a company has proper systems, strong controls, and a disciplined approach to finance. For SMEs, avoiding penalties can mean the difference between profit and loss in a competitive market.
1. Late Filing – Missing the quarterly deadline is the most frequent error. FTA penalties start at AED 1,000 for the first offense and AED 2,000 for repeats.
2. Incorrect Input VAT Claims – Businesses often try to claim VAT on blocked expenses, such as entertainment or certain personal costs.
3. Failure to Record All Sales – Missing invoices or underreporting revenue creates mismatches that the FTA can easily detect.
4. Misclassification of Zero-Rated vs. Exempt Supplies – Many businesses confuse the two, leading to miscalculations.
5. Poor Record-Keeping – FTA requires invoices, receipts, and reconciliations to be kept for at least five years.
• Set Reminders: Automate alerts for quarterly VAT filing deadlines.
• Reconcile Regularly: Match accounting records with VAT returns every quarter.
• Train Staff: Ensure finance staff know which expenses are deductible.
• Consult Experts: A professional review before submission reduces risks.
For many SMEs, VAT seems simple — 5% output tax minus input tax. But in practice, mistakes creep in. Engaging a consultant provides peace of mind. Not only do consultants file on time, they also handle FTA clarifications and ensure businesses can defend their numbers in case of audit.
VAT compliance is about discipline, documentation, and diligence. By putting the right systems in place, businesses can avoid penalties, strengthen their reputation, and keep cash flow steady.