5 VAT Mistakes That Cost UAE Businesses Thousands

Introduction

VAT compliance in the UAE seems straightforward — until it isn't. After helping hundreds of businesses, here are the five costliest mistakes we encounter repeatedly.

1. Claiming Input Tax on Blocked Items

Entertainment expenses, personal vehicle costs, and employee parking are common blocked items that businesses incorrectly claim as input tax. The FTA actively audits these categories.

2. Incorrect Place-of-Supply Determination

For cross-border services, the place of supply determines the VAT treatment. Getting this wrong can result in double taxation or missed zero-rating opportunities.

3. Late Registration

Many businesses exceed the AED 375,000 threshold without realising it. The penalty for late registration is AED 10,000, plus potential back-dated assessments.

4. Poor Record Keeping

The FTA requires records to be maintained for 5 years (7 years for real estate). Missing invoices or incomplete records during an audit can trigger estimated assessments.

5. Filing Return Errors

Simple data entry mistakes in VAT returns compound over time. A voluntary disclosure correcting past errors is far less costly than an FTA-initiated assessment.

Next Steps

If any of these sound familiar, our VAT health-check service can identify and remediate compliance gaps before the FTA does. For a deeper understanding of how VAT works in the UAE, read our complete guide to UAE VAT. Get in touch today.