VAT Mode makes it easier for your finance team to prepare expenses for VAT filing. It reviews each transaction, and automatically classifies whether VAT can be recovered, and suggests the next steps to take. This helps you save time, avoid compliance risk, and recover more VAT.
How to turn on VAT Mode
Step 1: Go to Accounting → Prepare
Step 2: Find the VAT Mode toggle at the top right of the page
Step 3: Switch it on
When VAT Mode is active, the Prepare view is replaced with two tabs, namely Classification Agent and Maximiser Agent.
VAT Mode is currently in beta. If the toggle is not visible, please contact your Customer Success Manager to enable it. This feature covers transactions from January 2026 onwards.
Classification Agent
The Classification Agent shows every transaction with a classification label. Each label tells you how the transaction should be treated for VAT purposes.
Input Allowed
What it means: VAT can be recovered if a valid tax invoice is attached.
What to do: Apply the 5% tax code.
Input Not Allowed
What it means: VAT cannot be recovered on this expense (e.g., personal, entertainment, or non-business expenses).
What to do: Set the tax code to 0%.
Input Allowed Conditionally
What it means: VAT may be recoverable, but more context is needed (e.g., depends on business use like office vs residential utility).
What to do: Review the expense and confirm it is for a business purpose before applying VAT.
Reverse Charge
What it means: This is a foreign service where VAT was not charged, but must be accounted for under UAE VAT rules.
What to do: Apply the reverse charge tax code.
VAT Exempt
What it means: No VAT applies (e.g., taxis, public transport, government fees, bank charges).
What to do: No action needed—nothing to recover.
Out of Scope
What it means: Transaction is outside UAE VAT (e.g., salaries, internal transfers, or expenses outside UAE).
What to do: No VAT reporting required.
Insights Not Ready
What it means: VAT analysis is still processing or multiple receipts exist.
What to do: Wait up to 24 hours. If still unresolved, contact support.
How to use it
Click any label to filter the list. Review the transactions in each category and update the tax code to match the classification. Use the Tax Code dropdown in the table to make changes. You can also filter by Tax Invoice status (Present / Not Present) and other criteria.
Maximiser Agent
The Maximiser Agent groups your transactions by what action is needed and shows how much money is at stake in AED and has three sections.
1) Increase Savings
These are transactions where your company could be recovering more VAT. You'll see recommendations like:
Apply VAT Input Tax Code
What it means: The expense is recoverable and the tax invoice is valid, but the 5% tax code has not been applied.
What to do: Bulk select the transactions, click Edit fields, and choose Standard tax rate (5%) from the tax code dropdown.
Request Pending Invoices
What it means: The expense is recoverable, but the attached receipt does not meet tax invoice requirements.
What to do: Bulk select the transactions and click Request action to request invoices from cardholders.
Add Tax Details
What it means: The expense may be recoverable, but more information is needed.
What to do: Open the transaction and confirm the business purpose.
2) Reduce Risk
These are transactions where something may be incorrect and could lead to penalties if not fixed before filing.
Apply 0% Tax Code
What it means: A non-recoverable or exempt expense has been marked with a 5% tax code.
What to do: Change the tax code to 0% to avoid overclaiming.
Request Pending Invoices
What it means: The expense is recoverable and is being claimed, but the attached receipt does not meet tax invoice requirements, which may create audit risk.
What to do: Bulk select the transactions and click Request action to request invoices from cardholders.
Add Tax Details
What it means: The expense may be recoverable, but more information is needed.
What to do: Open the transaction and confirm the business purpose.
3) VAT Compliant
No further action is required as transactions have the correct tax code and valid documentation. This section shows total AED value of compliant expenses or correctly handled
Exporting your data
Once you've reviewed and resolved transactions, the ones marked as Ready can be exported. The corrected tax codes will sync directly to your connected accounting software.
Go to Ready to Export to see all approved transactions and initiate the export.
What makes a valid tax invoice?
For Alaan to confirm a tax invoice is valid, the document needs to include certain information depending on the transaction value:
For expenses under AED 10,000: The receipt should show an invoice number, the supplier's TRN (Tax Registration Number), the VAT amount, and be labelled as a "Tax Invoice."
For expenses of AED 10,000 or more: In addition to the above, the invoice should also show your company name, your company's TRN, and your company address.
If the receipt doesn't include these details, the system will flag it as incomplete and recommend you request a proper tax invoice from the supplier.
Tips for getting the most from VAT Mode
Use it before every VAT filing. Open VAT Mode 2-3 weeks before your filing deadline. Start with the Classification Agent to update tax codes, then use the Maximiser to fix specific issues.
Chase missing invoices early. The sooner you request a valid tax invoice from a supplier, the more likely you are to get it before the filing window closes.
Check the Reduce Risk section carefully. These are potential compliance issues. Fixing them before filing protects your company from penalties.
Use the feedback buttons. If you think a classification is wrong, use the thumbs down button on the recommendation. This helps us improve the accuracy of VAT Mode for your transactions.
FAQ
Why can't I see VAT Mode?
VAT Mode requires an active accounting software integration (Xero, Zoho Books, or QuickBooks). Check Settings → Integrations to confirm your connection is active.
What period does VAT Mode cover?
Transactions from January 2026 onwards.
Can I change the classification?
You can always override a recommendation by selecting a different tax code. If you believe the classification itself is wrong, use the thumbs down button to let us know.
What does "Insights Not Ready" mean?
The analysis is still processing for that transaction. It typically resolves within a few hours.
Does Alaan file my VAT return?
No. Alaan prepares your data by classifying transactions, checking invoices, and recommending corrections. The actual VAT return is filed by your accountant or tax consultant using your accounting software.
Is the AI always correct?
Alaan's VAT Assistant uses AI to classify transactions and may occasionally make errors. Every recommendation includes an explanation so you can verify the reasoning. Your accountant should always review and confirm before filing.
Need help? Feel free to drop us an email on [email protected]