In the United Arab Emirates, Value Added Tax represents a major part of the country’s tax system. This is a type of tax that applies not only to the final product or service. But also to most supplies in GCC countries. The standard rate is 5%, and it applies to the majority of goods and services supplied in the UAE. From this perspective, it is important to consider VAT registration UAE. Along and its effect on businesses operating inside and outside the country.
One such company is Rank Accounting and Consultancy that has remained dominant in the accounting consultancy solutions in the UAE for years now. Multiple companies: helped with VAT registration paperwork.. During this, we observed the policies’ effect on their business. In this article, you will find information about the advantages of the VAT registration UAE procedure. Along with answers to major questions, and peculiarities of the registration process.
What is the threshold to register for UAE VAT?
In the UAE, there are two thresholds for VAT registration:
- Mandatory Registration: Business having an annual taxable turnover greater than or equal to AED 375,000 which has been 12 months continuously prior to that period. Further, the business that fits into this bracket is required to surpass this amount within 30 days from the day. T
- Voluntary Registration: The states of the UAE are given an option, that is businesses may or may not opt for voluntary registration. Those states where businesses have a minimum annual taxable turnover of AED 187,500 but do not the mandatory registration, will have
Benefits of VAT Registration UAE
Applying for VAT registration in the UAE could seem like yet another administrative task, but this move could benefit businesses in several ways Let us explore the top benefits
- Input Tax Recovery: With VAT registered business, on each time a business makes a purchase on which VAT is paid, such as (rent of office, utility bills, and other office supplies) the business can recover a significant amount of the VAT it pays, thus reducing this component of the price of purchases made by the business. This allows the business to utilize the money saved for any other business expenses and thus enhance the cashflows.
- Access to Golden Visa Scheme: VAT-registered organizations can apply for the Golden Visa for their employees. They will be provided with a long-term residence visa and their families were also open to bring along.
- Simplified tax reporting: When you pay VAT with RR Accountants, a percentage of that tax is also set aside for your business tax reporting. If you file some VAT returns and enter in the routine VAT payment process, you can manage your complete tax reporting requirement as well.
- Reduced risk of penalties: If you run a business without compulsory VAT registration in Dubai then you might even be imposed with heavy penalties by the FTA after a while. On leading of this, through VAT registration in the UAE, you can guarantee you stay within the law and then you can avoid any legal troubles and the associated fines with it.
Can I register for VAT if I have no sales?
However, you can go for VAT registration in UAE if you have no sales. You should consider it only if you believe that you will cross the AED 187500 threshold in the near future. In theory, you can register for VAT without actually selling anything, but it makes no sense. Such a proactive approach will not only save time. But also allows you to start using the VAT system when business picks up.
Do I Need to Register for VAT if I Provide Services Outside the UAE?
Am I Required to Register for VAT when My Services is Offered Outside the UAE? Whether VAT registration is mandatory or not, is decided by the type of services you offer along with the place where you are offering the services. For the Rest of The World If you were in providing services outside of the UAE there is no mandatory to register for VAT. But we would highly recommend you to talk to a specialized tax advisor for a more personal VAT advice.
Amending Old VAT Returns and Document Retention
- Amending VAT Returns: FTA provides rules for amending the submitted VAT returns if any errors are found. Please note the method to correct returns will be based on the type of error done.
- Document retention – as a registered VAT business in the UAE, you are obliged by the UAE VAT Decree-Law to retain all tax records and documents e.g. invoices, receipts, and bank statements for a minimum of 5 years from the date of the transaction. This way, you will always have all the required records should you be required to substantiate them with the FTA on an audit or in the event of a disagreement with the authority.
When Does the FTA Conduct Tax Audits?
The FTA reserves the right to audit businesses at any point in time, ensuring compliance and financial accuracy. They evaluate different factors such as the type of industry, and the risk profile of the business. Along with inconsistencies in VAT returns.
Conclusion
Overall, VAT registration UAE has a great number of advantages for your business. It allows businesses that operate in the UAE to recover their input tax. Also establish credibility, report on VAT in a relatively easy way, and apply for a Golden Visa.
So make sure you go with the right people for your business, Connect with us now!