Registering for VAT is not a mandatory requirement under any law for many small businesses in the UAE. Yet, it has several benefits. In case you have not yet registered for VAT, you should seriously consider getting it done. It is a prudent choice to avail the VAT registration services of Fortius Consulting Services in the UAE because of the skilful insights and experience of its professionals.
Also, the UAE is among the few and first members of the Gulf Cooperation Council to start indirect taxes on various services & products. So, the legislators of the UAE are definitely aiming toward creating seamless taxation methods across the country. By registering for VAT, you will be aiding in smooth and accurate tax collection by the government.
The Concept of VAT and Its Implications
The legal effect of registering for VAT is that your business becomes statutorily authorised to collect VAT on the goods you sell or the services you offer. So, if your services or goods come under the purview of taxable products, you must charge VAT on them from your clients or customers. The VAT collected should then be remitted to the UAE government.
As a business registered under VAT, you will also have the opportunity to claim ITC (Input Tax Credit) on the purchases. The ITC claimed by you will later be adjusted against your liabilities. Your business will also have to comply with the existing tax norms and file the returns annually or quarterly, as the case may be.
All VAT-registered companies must keep accurate and up-to-date accounting records, tax payment documents such as tax invoices, credit notes, debit notes, and records of all inward and outward supplies. Knowing VAT basics is an essential step in preparing for VAT, and registering for VAT is always the initial step in transitioning your company toward the VAT era. As a business registered for VAT, the government offers financial advantages, unlike unregistered UAE businesses.
VAT Registration in the UAE– The Types
There are several kinds of VAT registration services in Dubai. These are based on your total profits, revenue, and taxable income.
Free VAT Registration
Businesses with at least AED 187,500-375,000 in annual revenue are eligible for voluntary VAT services. If your business's turnover qualifies, you can obtain a consensual VAT registration and TRN number.
Mandatory VAT Registration
VAT registration is required for companies with annual sales over AED 375,000. To function properly in UAE, you'll need a Tax Registration Number. Once you obtain a TRN number, your company can charge VAT on your goods and services.
UAE VAT Registration Benefits
Not all companies must register for VAT. Businesses with a certain annual revenue must register for VAT. While you can consensually register for VAT, let's look at the perks.
To be VAT-registered has some benefits for small businesses. Let us take a look at these benefits in greater detail.
The company can get VAT refunds.
If your business is VAT-registered with the FTA, you can claim the VAT back at the end of each fiscal year. Voluntary VAT registration allows businesses to obtain VAT refunds for the preceding six months. If you've been in business for six months but haven't reached the threshold, you can reclaim VAT if you keep invoices and records.
The Company can go ahead with Input tax deductions
Input VAT is paid on purchases, and output VAT is collected on sales. The business can deduct input VAT from output VAT, reducing its VAT liability. Only VAT-registered businesses can claim input tax. Otherwise, the overall VAT paid for purchases is a cost incurred by your company.
The company can compete with industry leaders.
Startup entrepreneurs want their businesses to expand and succeed. Often, the best way to build a steady, loyal clientele is to appear larger and more capable than the major players. Your startup will thrive with UAE VAT registration. New small companies that haven't registered for VAT will have a disadvantage.
The company can expand.
Most businesses, especially established ones, won't collaborate with a startup if it's not UAE VAT-registered. A business that can't properly invoice, loses customers. This is bad for small businesses. It's ideal to get VAT-registered, so clients know they're dealing with a reputable company.
The company need not worry about hitting the VAT threshold.
Many smaller companies surpass the VAT threshold without even being aware. Unregistered businesses can get in a significant amount of trouble once the FTA uncovers the truth. Voluntary VAT registration eliminates the risk of an FTA fine or penalty due to oversight.
The Company gets tax IDs (TRN)
The TRN provided after VAT registration gives customers and clients confidence in a small business. The TRN on every invoice portrays a successful business because most people understand VAT registration requires passing a threshold.
Having a VAT number also gives your business credibility. This helps build your company's reputation and gives the company credibility.
The Process of Registration for VAT in the UAE
In UAE, the FTA has opened an online VAT registration portal. While business owners must ascertain their VAT registration responsibility, they must also know how to apply and the amount of information needed to successfully complete the online registration procedure.
Before trying to apply for online VAT registration, knowing the required details and steps will help you prepare in advance. As a result, the registration procedures can be finished quickly and without unnecessary delays or rejections due to incorrect information. Here’s all you need to know.
- E-Service account creation
- Logging into the e-service account
- VAT Registration Form e-Service Account: The online VAT registration form has eight sections where details must be provided for VAT registration. These sections are:
- About the applicant
- Applicant details
- Contact details
- Banking details
- Business relationships
- About VAT registration
- Submit after review
Some products and services are exempt from VAT. The indirect tax is straightforward and seeks to impose a limited load on consumers because it is collected in pieces during distribution, supply, and manufacture. VAT registration helps commercial transactions and overall growth in the UAE.