The government collects a consumption tax known as sales tax from individuals on the sale of goods or services. It is often paid by the final consumer at the time of purchase, and it is collected by the vendor, who then sends the money to the government on a periodic basis, based on the amount of sales the vendor makes, the items they sell, and the regulations of the state.
In this article we will explain the Sales tax compliance requirements in UAE. Companies like Fortius Consulting offer tax compliance services to help you become more attentive in submitting timely returns, making on-time payments, and to stay tax vigilant.
Selling in the UAE has a significant growth potential for a company that is not based there. Having stated that, there are two distinct viewpoints about this matter. When you sell your product in the UAE, which is such a vast market, you have the potential to make a lot of money. But if you aren't familiar with the indirect tax regulations in the UAE, you may end up losing a significant portion of those earnings.
In a nutshell, tax compliance involves preparing and submitting returns for both sales and use tax. Whenever a taxpayer is authorised to collect or remit sale and use tax in a certain jurisdiction, that taxpayer is responsible for filing timely returns and making timely payments of the tax due.
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The procedure of complying with the sales tax can be broken down into 8 distinct steps. Let us have a look on each of them below:
1. Compile all the information
In order to accurately file a return for sales and ensure tax compliance, you will need to collect data from a wide variety of diverse sources inside the organisation. Working for a bigger organisation will need you to collaborate with employees from other departments.The technical, legal ,marketing, operations and corporate secretary, and other departments are among the most important ones.
Data may come from a great number of different sources, such as the sales journal, the accounts payable, the fixed assets books, and much more.
2. Evaluate and integrate the information
When data is collected from many departments, it might be difficult to evaluate and compare the results of those departments. When it comes to reporting, the many reports and pieces of data need to be unified. You may make this process simpler by using a variety of different tools, some of which include Microsoft ,Excel, Microsoft Access and other similar programmes.
In addition to that, you'll need to verify the data. When reconciling the data, some factors to take into consideration are as follows:
3. Finish filling out the tax return
After you have gathered all of the essential information, the next step is to fill out the relevant tax forms with that data. It is vital to go through the tax returns in order to have an understanding of what is needed and how it should be presented for ensuring tax compliance.
Be aware that the process of preparing returns differs from state to state. The data on sales is published separately from the data on purchases. This may be done on a different return in certain states, while in others it might merely be done on various routes on a single return. Other possible distinctions include sales versus the use of the item by the seller, rental or lease agreements, telecommunications, and other sorts of special taxes.
4. Submit the tax return and make tax payments
After the return has been completed, it has to be submitted within the allotted period and the tax needs to be paid over to the taxation authority as soon as possible. Your filing regularity and the date by which it is due will be communicated to you by the jurisdiction. Take into account the fact that the deadline for submitting the return as well as paying the tax applies to both of these activities.
The month after the month in which a taxable event occurred is typically the due month for sales tax returns. The deadlines are different in each jurisdiction. The 15th, 20th, 25th, and last day of the month are typical times for payments to be due. Be aware that the due dates for those who file using EFT may be different than those who submit using check payments. Please consult with your tax compliance service provider for the correct dates.
5. Settle and verify all payments
After you have sent in the tax payment, you are required to check with the state Revenue Department to ensure that the money was successfully received and processed. In addition to this, you need to do reconciliations by banks to ensure that the correct amount is cleared for the payment.
6. Update your calendar
Make use of a "Tax Calendar" spreadsheet to keep tabs on all the dates, amounts, preparers, filing methods, dates, confirmation numbers, and more that pertain to your tax returns and payments.
After you have put together this tax calendar, be sure to keep it up to date by revising it after you have submitted each return. By doing things this way, it will be much simpler for you to revisit and pinpoint where you went wrong or to present proof that a tax return was submitted and a payment was paid.
7. Attend to the notifications
When mistakes are made, the authorities in charge of taxes will issue notices. There are several alerts that demand immediate attention since they have limited reaction periods connected with them. When responding to notifications, it is essential to supply the taxing authority with all of the documents that pertain to the matter. Once a notification response is received, it should be monitored until resolved.
Maintaining tax compliance with sales tax requirements is a continual task. After you have completed the seven stages that came before, it is just a question of repeating the process and modifying it as required. We really hope that the information provided here will be of use in explaining "how to conduct sales tax."