UAE VAT has been in place since 2018 at a standard rate of 5%. For most businesses the returns themselves have become routine. That routine is exactly where risk builds: the same small error, repeated every period, can quietly grow into a significant liability and penalties.
What a VAT health check looks at
A health check is a structured review of your VAT position over a period, usually the last one to two years. It tests whether what you have filed matches your records, and whether your records support what you have claimed.
- Input VAT claimed on expenses that are blocked or only partly recoverable.
- Output VAT on supplies that may have been treated as zero-rated or exempt without the right support.
- Reconciliation between VAT returns, the general ledger and financial statements.
- Tax invoices and credit notes that meet the required format.
- Place-of-supply decisions on cross-border services and goods.
Common issues we find
The most frequent problems are rarely complicated. They include input VAT claimed without a valid tax invoice, VAT recovered on entertainment or other restricted costs, imports of services not reported under the reverse charge, and differences between the VAT return and the accounts that nobody has explained.
Individually these are small. Across many transactions and several periods, they add up, and the penalty regime means an error found by the authority costs more than the same error corrected voluntarily.
Why reviewing past returns pays off
Finding an error yourself gives you options. Depending on the size and nature of the error, it may be corrected in a later return or through a voluntary disclosure, which generally attracts lower penalties than an error discovered during an audit. A health check also shows where your process is leaking, so the same mistake is not repeated next quarter.
When to run one
- Before a change of finance team or accounting system.
- Before an investment, sale or bank facility where VAT exposure could be questioned.
- When the business has started cross-border trading or new types of supply.
- If VAT has never been reviewed since registration.
How we approach it
We review returns against the ledger and a sample of underlying documents, quantify any exposure, and recommend how to correct it and how to stop it recurring. Where corrections are needed, we support the process with the authority. See our Tax & VAT Advisory service.
This article is general information, not tax or legal advice. Rules change, and every business is different, so speak to an adviser about your own position before acting on it.