What information do I need to report my first VAT return?

Q I’m due to complete my first VAT return for the quarter ending March 31. What information do

I need to report in the return and where can I find guidance? LL, Abu Dhabi A

Completion of your VAT return is all online via the Federal Tax Authority web portal where you logged your initial registration. All amounts due must be paid electronically. The VAT return must be filed and paid 28 days after the end of each VAT period. The first period can be up to five months in length but all subsequent return periods will be for three months. You should check your dashboard on the FTA portal to confirm the dates relevant to your business.

The FTA have issued a comprehensive guide to completing the VAT return and making payments, which can be found at www.tax.gov. ae/pdf/vat-returns-user-guideenglish.pdf.

It is definitely worth reading regardless of whether you are completing the return yourself or getting professional help. The guide makes it clear which transactions should be reported in each box and like everything in tax, the devil is in the detail.

The first boxes, which identify you and your business, are pre-populated with the information entered on registration.

For each of the seven emirates you then record your standard rated (5 per cent) supplies and VAT on these supplies in boxes 1a to 1g.

Box 2 is for VAT refunded to tourists so is irrelevant for most businesses as you have to be registered with the FTA to participate in the scheme.

In box three you need to include supplies of goods and services under the reverse charge mechanism. This can be complicated so reading the guide is a must.

Imported goods can be declared in either Box 3 or Box 6 depending on your customs declarations. Imported services will be declared in Box 3.

Boxes 4 and 5 are for zero rated and exempt supplies where there is no VAT to declare but you need to report the sales values.

Reporting your input tax is shorter and simpler; there are just two lines here to populate. Box 9 is for standard-rated supplies that you want to reclaim the VAT on.

Be careful to exclude any non-recoverable VAT, but you still need to report the inputs even though you will not be reclaiming the tax. Obviously any exempt or zero-rated inputs would not be included here as there is no VAT to recover.

Box 10 is for the input VAT side of the reverse charge entries and is the other component to what is reported in Boxes 3, 6 and 7.

The return automatically calculates the VAT payable and recoverable and the net of these is the amount payable to the FTA. Remember to reconcile your VAT accounting ledger entries to your VAT return and adjust your accounting entries accordingly.

Ideally you want to be in a position where your accounting entries mirror what has been reported on your VAT return, so if you were ever subject to a VAT audit, which could be up to five years later, you could provide the underlying detailed transactions to support the return totals you reported without discrepancies.

I rent an office and the lease runs from September 1 until the end August each year. I have just received an invoice from my landlord for the VAT for January to August 2018. The only item on the invoice is for the VAT. I don’t know how to record this in my accounting system, as I am only able to record costs as the total costs with or without VAT. Obviously I cannot book a VAT-only invoice like this. How do I show the correct amount of VAT I can reclaim? PW RAK

This is a problem lots of businesses are facing in the first months after the introduction of VAT, where the tax is being charged on costs recorded and fully paid for in 2017.

You need to effectively reverse the previous rent cost booking that was paid without VAT, and replace it with an entry that includes the cost plus the VAT. Book it in your accounting system as a new supplier invoice but add an extra line.

The first line on the invoice would be for eight months’ rent plus the newly charged 5 per cent VAT. The second line is a credit of the rent without VAT. The net of these two lines will be just the VAT cost for eight months included on the new invoice.

To give an example of how the numbers might work: imagine the full year’s rent was Dh240,000 exclusive of VAT.

You have now received an invoice for Dh8,000, which is the VAT due on eight months’ rent. The first line on the new supplier invoice booking would be for eight months’ rent plus 5 per cent VAT at Dh168,000.

The second line would be a negative entry for eight months’ rent coded with no VAT, so minus Dh160,000. The net of these two lines is an entry in your accounting system of Dh8,000 VAT.

Don’t be tempted to record it in the VAT return as an adjustment to input VAT. The FTA’s return user guide sets out specific examples of adjustments that should be reported in this box and a VAT-only invoice, as described above, does not fall within their definition of an adjustment.

Lisa Martin, a chartered accountant with more than 20 years commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House

Email any VAT queries to pf@thenational.ae