Launching and growing a business in the UAE means staying sharp on VAT, from VAT registration to ongoing VAT Compliance and, when necessary, handling assessments and disputes with the Federal Tax Authority (FTA). This guide explains VAT assessments, how the UAE’s Tax Dispute Resolution Committee (TDRC) process works, and the timelines, documents, and best practices to protect a company’s position. So it remains a growth enabler, not a risk.
Awami helps UAE businesses stay compliant across VAT, Corporate Tax, Accounting & Bookkeeping, Audit, Bank Account Opening, Golden Visa, and PRO services.
VAT in the UAE is a self-assessment system—businesses calculate and file its returns, and must correct errors proactively via the FTA’s mechanisms when issues are discovered. When the FTA identifies discrepancies, underpayments, or non-compliance (e.g., late registration, incorrect apportionment, missing documents), it can issue a tax assessment and/or penalties.
FTA applies VAT under the UAE VAT Law (Federal Decree-Law No.8 of 2017) and Tax Procedures Law.
Omissions or mistakes in its returns must be corrected under the FTA-approved method; updated guidance details new VAT return mistake and omission correction procedures that come into effect from 2025.
When VAT Registration is Mandatory (and Optional)
Having proper VAT registration status is fundamental to the avoidance of charges:
Mandatory VAT registration threshold: AED375,000 of taxable supplies/imports in the last 12 months or expected in the next 30 days.
Voluntary VAT registration threshold: AED187,500, subject to conditions and evidencing intent to make taxable or relevant supplies under amended rules.
Free zone companies are also subject to its registration rules when thresholds or conditions are met.
Missing timely registration can trigger penalties and downstream assessments
Common Triggers for VAT Assessments
- Late or incorrect VAT registration and late return filing/payment.
- Incorrect output, input VAT recovery, or apportionment (including Capital Asset Scheme).
- Inadequate record keeping or inconsistencies between returns and accounting/customs data (e.g., VAT301).
- Failure to correct known defects via the FTA’s correction mechanisms within prescribed time limits.
VAT Dispute Pathway: Review, Reconsideration, TDRC, Court
UAE law provides a structured, time-limited procedure whereby businesses can resolve disputes fairly:
Tax Assessment Review with the Federal Tax Authority (FTA)
- Start by requesting the FTA to review an assessment if there’s an error or misunderstanding; act within the prescribed business-day timeframe.
Reconsideration Request (FTA)
- If unsatisfied, submit a reconsideration request to the FTA within 40 business days of the decision/notification, following Article 27 of the Tax Procedures Law.
- The FTA generally has 45 business days to respond, and may uphold, amend, or reverse its decision.
Tax Dispute Resolution Committee (TDRC)
- If the reconsideration result is unfavourable, file an objection to the TDRC within 40 business days of the reconsideration decision.
- The TDRC is an independent committee that assesses the merits of the case, evidence, and arguments from both the taxpayer and the FTA, and issues a decision on a defined timeline.
Court Appeal
- Either party may escalate a TDRC decision to the courts; file within the statutory period (commonly 40 business days) for judicial review.
The FTA and UAE Ministry of Justice openly detail this process, along with filing requirements and timelines, in a transparent format.
Timelines and Filing Fundamentals
- Reconsideration: file within 40 business days of decision notification; FTA response typically within 45 business days.
- TDRC objection: file within 40 business days of the reconsideration decision; the committee aims to issue a verdict within 20 business days, extendable by another 20 business days.
- Submissions typically must be complete, with all supporting evidence, and often in Arabic for committee filings per official guidance.
Always verify the latest FTA pages before filing to ensure current procedures and timelines.
Evidence and Documentation to Prepare
- VAT returns and payment proofs aligned to the disputed periods.
- Reconciliations of returns to the general ledger, sales/purchase listings, bank statements, and customs/VAT301 records.
- Contracts, tax invoices, credit notes, and import/export documentation supporting tax treatment and input tax recovery.
- Calculations for input tax apportionment and Capital Asset Scheme, including revised apportionment changes effective 2025.
- Internal memos and compliance logs demonstrating processes, training, and corrective actions taken.
Best Practices to Avoid Penalties and Strengthen Your Position
- Maintain a VAT compliance calendar: returns due within 28 days from the end of the tax period; monthly vs quarterly assigned by FTA based on revenue.
- Reconcile its returns to financials and customs data every period; promptly correct errors under updated FTA mechanisms.
- Keep robust records per FTA requirements; adopt ERP configurations aligned with updated input tax apportionment rules for 2025.
- Conduct mock VAT audits and staff training; document tax positions for complex or zero-rated/exempt supplies.
CONCLUSION
VAT is manageable with the right processes: obtain VAT registration, implement airtight VAT Compliance, reconcile each period, and act swiftly if an assessment arrives using the FTA’s review, reconsideration, and TDRC pathways. Awami provides end-to-end VAT support—advisory, registrations, return filing, error correction, dispute management, and audit readiness—to keep operations compliant and focused on growth.
Speak with experts at Awami today: +971 52 147 1003.
Frequently Asked Questions (FAQs)
What is TDRC?
The Tax Dispute Resolution Committee is an independent body that reviews objections to FTA decisions, including VAT assessments and penalties, within defined timelines.
How long do I have to object to an FTA decision?
Generally, 40 business days for reconsideration and 40 business days to file to TDRC after a reconsideration decision; always check the latest FTA guidance.
Can TDRC decisions be appealed?
Yes, either party may escalate to the UAE courts within the statutory period.
What if I find an error in a past VAT return?
Use the FTA’s correction mechanisms; the FTA issued updated procedures for correcting VAT return errors and omissions effective 2025.
Do free zone companies need VAT registration?
Yes, when mandatory or voluntary thresholds/conditions are met, TRN is issued upon approval.
