VAT Record Keeping

Businesses must keep tax invoices, credit and debit notes, import/export documentation, VAT returns, accounting records, contracts, bank statements, and inventory details. These documents prove accurate VAT calculation and reporting during an FTA audit.

VAT records must generally be retained for 5 years. However, businesses involved in real estate transactions must keep VAT records for 15 years. This extended period allows the FTA to review long-term property-related VAT adjustments.

The FTA requires all VAT records to be maintainable in Arabic, even if business transactions are conducted in English. If records are kept only in English, the FTA may request Arabic translations during audits, and failure to provide them can result in penalties.

Yes, businesses can store VAT records electronically, provided the records are easily accessible, tamper-proof, and retrievable during an FTA audit. Cloud-based or ERP systems are acceptable, but businesses must ensure proper backup and data security.

FTA penalties include:

• AED 10,000 for the first violation of record-keeping requirements
• AED 20,000 for repeated violations
  Additionally, businesses may face VAT reassessments, denial of input VAT claims, and reputational risks.

Free Zone companies, including those in Designated Zones, must maintain complete VAT records for transactions with both mainland and international clients. FTA specifically checks for correct application of zero-rated, exempt, and reverse charge supplies in Free Zones.

A valid VAT invoice must include:

• TRN (Tax Registration Number) of supplier and recipient
• Invoice date and unique invoice number
• Description of goods/services supplied
• VAT rate and amount charged
• Total value inclusive of VAT
  Invoices missing these details may be rejected by the FTA during compliance checks.

Businesses should reconcile VAT records with returns every quarter before submission. For high-volume businesses, a monthly reconciliation helps detect errors in input VAT claims, reverse charge mechanism entries, and zero-rated supply reporting.

Frequent issues include:

• Missing or incomplete invoices
• Claiming input VAT without valid supporting documents
• Incorrect treatment of imports and exports
• Poor segregation of taxable, exempt, and zero-rated supplies
• Not maintaining records for the required 5–15 years

Yes, VAT record keeping can be outsourced to tax consultants or accounting firms. The FTA accepts third-party maintained records as long as they are complete, accessible, and compliant with UAE VAT Law. However, the legal responsibility remains with the registered business.