VAT Management & Cash Flow Optimization

Due to the current covid19 pandemic affecting all businesses in UAE mainly SMEs and in particular their cash flows, VAT management is crucial now to optimize cash flows.

Highlighting below few heads to be considered:

1.If you are always in a VAT refund position, request the VAT refund every VAT period and don't accumulate as this will make the verification process faster by FTA and will secure your cash

2.Review all expenses and recheck whether or not all the allowable input VAT is recovered

3.Review RCM transactions and make sure that it is claimed as input, if the recovery conditions are met

4.If you are not a VAT registrant, consider the voluntary registration option to claim input VAT and defer VAT on imports rather than paying in cash

5.If you are making exempt and taxable supplies, review the method followed to apportion the input VAT, special method might be better than standard for your business and boost your cash position

6.Review the internal approval procedures of the suppliers invoices and align it with the tax invoices date to claim VAT before paying to your suppliers

7.Review your credit terms and try to collect VAT from your customers before the due returns

8.Consider that receiving advances from customers will increase your cash but it will also increase the VAT payable amount

9.Consider VAT group registration to eliminate VAT on intra-group transactions as it is out of scope of VAT

10.Benefit from the VAT administrative extension to change the length of your VAT period to be half yearly, mainly for SMEs with total taxable supplies in the last 12 months of AED 9m or less 

11.If you are in payable position, consider to deregister voluntary if your taxable supplies in the lasy 12 months are less than the mandatory registration threshold of AED 375,000 but more than the voluntary registration threshold of AED 187,500

Disclaimer: Content posted is for informational & knowledge sharing purposes only and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/ interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/ post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.