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How to Register And Amend Value-Added Tax Registration in the UAE

December 15, 2022

Fortius Team

A Man's hand pointing out Value Added Tax (VAT) text in a notepad

Value Added Tax in the UAE: What’s the Scenario? The UAE attracts investors from all over the world for many reasons, one of which is its attractive tax environment. While the UAE government does not levy personal and corporate income taxes, businesses and individuals are subject to other taxes, such as VAT. VAT is relatively new to the UAE business landscape, having been introduced only recently in 2018. Implemented at a flat rate of 5%, the purpose of this tax is to provide the government with additional revenue, which will be used to fund high-quality public services. Who Requires VAT? “Is VAT mandatory for my business?” This is a common question business owners in the UAE ask, especially if they are new to the market. VAT IS NOT MANDATORY FOR ALL BUSINESSES. While some products and services are VAT exempt, the tax is levied upon the consumption of goods across various business sectors. In the UAE, VAT registration is mandatory if your supplies and imports exceed AED 375,000. Under the tax law, businesses whose taxable imports and supplies exceed AED187,500 can voluntarily pay VAT. So, what are these “taxable imports and supplies?” According to UAE’s Federal Tax Authority (FTA), “taxable supplies” are categorised as “ goods or services made by UAE-based businesses that may be taxed at five or zero per cent. For this purpose, imports are also considered if the supply of these goods or services would be taxable if made within the UAE. In other words, a VAT-registered business in the UAE collects tax from its customers and pays it to the government. Furthermore, the government can reclaim the VAT when a VAT-registered company pays it to its suppliers. Now that we’ve explained the basics of VAT in the UAE let’s get to the core topic. VAT Registration & Amendment Processes: What to Do & How to Do It As with many other tax registration processes in the UAE, registering your business for VAT is fairly quick and straightforward. Take a look: Step 1 Create an account on the Federal Tax Authority website. Step 2 Visit eservices.tx.gov.ae and select “Sign Up.” Step 3 Provide your email address and password, and answer the security questions. Step 4 You will receive a confirmation email explaining the further steps. Step 5 Once your email is verified, you can complete your VAT registration by logging in to your e-service account. Also Read: Gearing Up For FTA VAT Audit: Why & How To Be Well-Prepared Amending VAT Registrations The VAT application may need to be amended after the firm has been registered. You can make these amendments online, but you must keep in mind that you must inform the FTA within 20 days of making any amendments. Failing to inform the administration of amendments in your tax record will attract the following penalties: AED 5,000 for first-time offenders. AED 15,000 for repeat offenders. Other VAT-related offences also attract penalties such as: AED 20,000 for delayed submission of VAT registration. AED 1,000 for not filing VAT returns for the first time. AED 2,000 for failing to file VAT returns within the next 24 months. AED 15,000 for not displaying prices without including tax. AED 10,000 for the first-time offence of not maintaining records. AED 50,000 for failure to maintain records subsequently. Procedure to Make Amendments to the VAT Registration Kindly note that some VAT-related amendments require prior approval from the FTA. For amendments that do not require approval, you can follow this procedure: Visit FTA’s VAT registration portal. Find your approved VAT registration application in the dashboard tab. Click on the “Edit” button to update the following details: Changes or additions regarding your business activities. Your organisation’s GCC activities. Updates or edits in the customs registration information. Click on “Submit” to make the changes. The amendments will automatically reflect in your profile. Procedure for Changes Which Require FTA Approval Inform the FTA in writing about the changes made to your VAT registration. You can amend the details only after the FTA approves them. Once you receive FTA’s approval, click on the “ Amendments” button to change the following information: Business details Business-related bank details Modification of VAT application Business relations details Updating the declarations Actual or estimated financial transactions Import and export details Authorised signatory Communication preferences 4. Cross-check all the information before clicking on the “Submit & Review” button. Some sections of the VAT application are prohibited from direct amendments. The restricted sections are: 'Exception from VAT registration' cannot be changed directly in the section 'About the VAT application'. ‘Notification language change’ cannot be changed in the Declaration section. The ‘Communication Preference’ section is also exempted from alterations. The VAT registration and amendments process are relatively easy. However, if you require guidance, you can always reach out to our VAT consultants at Fortius. You can also call the Federal Tax Authority at 600 599 994 or make a direct request on their official webpage. Be VAT Compliant With Fortius Guidance If your business falls within the VAT criteria, you must register for VAT and ensure compliance to avoid penalties. To make your VAT registration easier, invest in Fortius Consulting Services' VAT services in the UAE.

December 10, 2022

Fortius Team

Close-up shot of a chief finance officer reviewing the company's financial chart documents.

Your finance department needs to have clearly defined roles if you want your small firm to function at a high level. But not all small businesses have the resources to recruit a CFO. You won't need to employ a CFO when your company first launches. However, your financial department's requirements will vary as your company grows. You'll eventually have to think about hiring one. An outsourced CFO can help your company grow stronger and more secure financially without incurring the same expenditures as a full-time, experienced CFO. Contact Fortius Consulting Services to acquire the best outsourced CFO services in UAE and Asia. A Brief Explanation of CFO (Chief Financial Officer) The highest-ranking financial expert in an organisation, the chief financial officer (CFO), is in charge of the company's financial well-being. The most professional and senior financial employees in a company are the CFOs. They monitor cash flow, budget the company's finances, identify its strengths and weaknesses, and make strategic recommendations. They are knowledgeable about state and federal laws and generally accepted accounting standards (GAAP). The SEC is one of the regulatory bodies and authorities CFOs must report to. Indications That Your Small Business Needs a CFO Do you intend to sell your business? CFOs can help you with mergers and acquisitions. If your firm undergoes audits frequently, you'll want a CFO to focus and ensure everything is going right. As they will also represent the business during an audit, you, as the owner, will have one less thing to worry about. Hire a CFO if you believe these efficient experts will help your company excel. In other words, a CFO can step in and organise things for you if your finance department is disorganised and requires more structure. These are the top indications that your small business needs a CFO. Signs to Look Out for to Hire a CFO When and why would your company need the expertise of a CFO? Here are some of the situations that can be handled better by a CFO, either in-house or outsourced. Take a look and decide if your company needs to hire a CFO now. Growing Fast If your company is growing, a CFO may be necessary. You can effectively handle all of the sectors you are expanding into with the aid of a CFO. When a business starts to flourish, many need to learn how to manage cash inflows and outflows or even when they need more funding. This is a typical indication of the need for a CFO. Deteriorating Profits If your small business's profits are declining and you need to understand why, you need to consider hiring a CFO. This is particularly valid if sales are holding steady or even rising. A CFO will be more knowledgeable about the reasons behind your dropping profitability. They can review your financial statements, accounts payable and receivables, and cash flow and offer insights into what they discover. Their advice might help you regain profitability so that your company can expand. Considering Larger Investments Hiring a CFO might also be a good idea if your company is planning to invest in businesses that could affect your profit margins. Some examples of this could be expanding your products or investing in automation to meet your business needs. In such situations, the CFO might help your company with an effective investment strategy. Entering a Fresh Market A CFO's competence extends beyond finance, although it is frequently connected with financial decisions. They can help ensure the success of the expansion, whether you're creating a new service, offering, or seeking a new consumer base. CFOs are also very good at identifying market trends and new business prospects by utilising data. When your company has the resources and ability to enter new markets, your CFO will let you know. Contemplating a Merger or Acquisition Mergers are challenging. You will require a CFO on your team if your business is being bought or has acquisition intentions for another company. Before, during, and following the merger, your CFO will ensure the accuracy of your financial statements. To verify if the acquisition helps your company, CFOs can also examine the financial data of the competing company. During this shift, they can relieve some of your burdens while ensuring that everything goes as smoothly as possible. Raising Capital If you need to raise money, a CFO can also assist you in figuring out how much money you'll need to invest and how much revenue you'll make. You may need to get a bank loan to buy new equipment. Or perhaps you're seeking a venture capitalist or investor to provide something more substantial. A CFO can help you with this procedure, no matter your circumstances. When you offer your financial records to an investor or lender, they will ensure that they are all accurate and well-organised. This raises the likelihood that you'll get the money you need. Handling Time-consuming Manual Processes Is your staff managing the books and taking a lot of time? You need to sit back and assess whether your time is being used effectively. Simple bookkeeping activities should take less of your time. If bookkeeping staff are ineffective, you could be incurring excessive payroll expenses. A CFO can enhance every step of your bookkeeping procedure. They'll be able to assign tasks and ensure you're utilising the most recent software to make your bookkeeping tasks more efficient. Also Read: Why Does Dubai Stand Best Among The Cities In The World For Entrepreneurs Inability to Understand Financial Reports Always examine your finances before making a significant business choice. Even if your bookkeeper produced correct financial records, you need help comprehending them. The financial report analysis is a speciality of CFOs. They'll be able to tell you whether you have enough money to make critical financial commitments like expanding your business, taking on debt, hiring additional workers, and purchasing new equipment. Contacting Experts You can get in touch with the appropriate industry specialists with the assistance of a CFO. The majority of

December 5, 2022

Fortius Team

In January 2022, the UAE Ministry of Finance announced the implementation of corporate tax across the United Arab Emirates. If you are running an organisation in the UAE, it’s time to make yourself aware of corporate tax and its role in your business. What is Corporate Tax & How is it Implemented in the UAE? Recently, the UAE government introduced new taxes for UAE businesses. Value-Added Tax (VAT) was introduced in 2018, followed by corporate tax in January 2022. Corporate tax is a relatively new concept in the UAE, which will only come into effect in June 2023. Corporate tax is a direct tax levied on the net profit of an organisation. Corporate tax is also known as Corporate Income Tax or Business Profit Tax. Which businesses are subject to UAE corporate tax? Generally, the UAE corporate tax applies to all companies, but for some exceptions: All businesses involved in the extraction of natural resources Foreign companies or individuals who run a regularised business in the UAE Apart from these exceptions, the UAE corporate tax applies to all categories of net income and profits mentioned in financial statements prepared as per internationally accepted accounting standards. Implementing this tax in the UAE is expected to open more foreign investment opportunities for UAE-based businesses, cementing the UAE’s position as a leader in the global economy. Acknowledging the corporate tax in UAE will also improve corporate governance and strengthen the nation's economy. Besides, businesses may find it more beneficial to pay corporate taxes rather than additional income taxes. Above all, corporate tax is set to fortify UAE’s strategic objectives and reinforce its commitment to transparent tax practices. Details About Corporate Tax Limit & Its Applicability in the UAE UAE’s Ministry of Finance has drafted some applicability limits for corporate tax: Tax-free income up to AED 375,000. AED 375,000 and above are subject to a 9% tax. Large multinationals meeting specific criteria may be taxed at a different rate (not yet specified). The Ministry states that corporate taxes will be levied only if the net income crosses the defined threshold limit. Businesses whose net income is below the limit are exempted from corporate tax. Applicability of Corporate Tax According to the UAE Ministry of Finance announcement, the Federal Tax Authority (FTA) will be responsible for the administration, collection, and enforcement of the corporate tax from: Banking operations. All free zone businesses in the UAE. All companies and individuals running a business with a UAE commercial license. Foreign firms and individuals permitted to operate in the UAE on an ongoing or regular basis. Organisations dealing with real estate management, agency, brokerage activities, and construction. Corporate Tax in the UAE: When Will it be Implemented? The Ministry has announced that corporate tax will be implemented on or after June 1, 2023. The authorities have announced dates of corporate tax applicability in recognition that businesses follow different financial year start dates. Here are the details: Businesses whose fiscal year starts on July 1, 2022, and ends on June 30, 2024, are subject to UAE Corporate Tax from July 1, 2023. Businesses whose fiscal year starts on January 1, 2023, and ends on December 31, 2022, are subject to UAE Corporate Tax from January 1, 2024. Calculating Corporate Tax in the UAE The following steps should be followed when calculating corporate tax: Find the adjusted gross income Find the allowed deductions to calculate the taxable income Evaluate the business taxable incomes using the below formula: Taxable income = Adjusted Gross Income - Applicable Deductions Finally, the taxable income is multiplied by the corporate tax percentage to calculate the corporation's tax liability. According to UAE tax laws, corporate tax is calculated as 9% of net profit after subtracting all applicable deductions and excluding exempted income from the financial statements. Taxes paid on foreign earnings will also be deducted from profits shown in the financial statements. Finally, the taxable income is calculated by subtracting all deductions from the net profit. Essential Documents Needed to File Corporate Taxes The UAE Income Corporate Tax regime uses the accounting net profit position in a business's financial statements to determine taxable income. Taxable companies should submit the following information while filing for corporate taxes: Taxable incomes, including profits from product or service sales Capital gains Rental income Business financial reports Accounting books Details of income from interests and commissions Corporate Tax Filing: Major Pointers to Keep in Mind Since many UAE-based businesses will be filing their corporate taxes for the first time, here’s a “to-do” list to bear in mind: Provide only accurate and relevant information for documentation purposes Be well-versed in corporate tax implementation and court rulings on the same Follow the formulated law stated by UAE’s Ministry of Finance Consider tax planning before filing to avoid paying more than the actual taxable amount. Consider your business objectives, future incorporations, and changes that will be made for long-term tax benefits. Simple Tips to Avoid Tax Burdens & Gearing Up For Corporate Tax Implementation Your organisation could become liable for unnecessary tax burdens if you are not careful. To avoid heavy tax burdens, companies should take the following precautions: Claim all expenses incurred by company entities Invest in long-term assets Invest in tax-efficient investments and divert the contribution towards tax-efficient accounts Accelerating depreciation charges for the purchases in the firm Award stock options to employees and benefits for employees’ dependents Now that you know all the essential details about implementing the corporate tax in the UAE, it is time to incorporate corporate tax into your business. Also Read: How SMEs in UAE Benefit From Outsourcing Accounting Services The 4-Phased Approach To Incorporating Corporate Tax Assess the impact of corporate tax on your business before the issuance of corporate tax laws After the tax laws are issued, make a detailed assessment and plan for your tax methodologies Ensure that all activities adhere to the guidelines Double-check to ensure you have submitted the first corporate tax returns post-implementation Gear up your finance teams and business

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