5 Points On Vat That Will Help Small Businesses In The Uae

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Here are tips one should keep in mind for VAT in UAE:

VAT was introduced in the UAE on January 1st, 2018. VAT refers to the value-added tax, which is 5% in general, but there are some exemptions. VAT is a tax that accumulates the charges from every point during the sale. The consumer is the one who finally pays these accrued charges.

VAT will not be a cost to the business.

The business acts as a middle man between the consumer and the Tax Authority. It collects the taxes from the customers and pays it to the government. The business also receives refunds from the government on the supplier tax that it has paid. The resulting tax receipts collected show the total of the value-added during the whole process.

Under the UAE Federal and Emirate government, the consumers (the taxpayers and the residents) are provided with several government amenities. These include many different public services like hospitals, roads, public schools, parks, waste control, and police services. These services are paid using the taxes under the government budget.

VAT acts as an alternate and new source of income. ...
... It aims to provide the country with high-quality public services for the future. It is essential since it helps the government move forward and achieve its vision. It reduces dependence on income derived solely from oil and other hydrocarbons.

Who is eligible to register for VAT?

If your business sales or taxable supplies exceed the limit, that is AED 375,000 annually; then, it must register for VAT. A business can also register for VAT if their taxable supplies and import rates exceed AED 187,500 per annum.

Let us see the number of benefits gained from VAT, both for the UAE as a whole and for your business and future profit margins.

Here are a few critical points on VAT for businesses in UAE:

1. Changes to Business Structure:

You can see that there will be a sudden and significant cash flow impact on many companies. You need to understand that VAT is going to be charged at every phase of production and distribution. This can prove a challenge if you have more than one business entity providing the same product or service.

You can avoid taxes on each transfer between the different steps of the process and inevitably paying twice. In the case of large businesses having multiple bodies, you will have to consider a more significant restructure to avoid VAT leakage. A VAT Consultant in UAE will be ideal to hire.

2. Distributed Costs:

Small businesses, in particular, have the pre-implementation costs to consider, which can be a pain. But eventually, it is the consumer who will pay the most, according to the new VAT laws. Although the procedures for collecting and remitting VAT primarily lies with you, the company will ultimately pass all these extra charges to the customer through sales channels.

3. Implementing Advisory opportunities:

The implementation has opened up several doors and opportunities for advisory firms who have been specializing in VAT. The main reason behind this is that many companies do not have the time or resources to engage in the new VAT system's complexities. The companies usually end up hiring VAT consultants in Dubai to look into the new laws and find ways for their business to adapt. It also provides the set up of a VAT-compliant system for the company.

4. More Accountability:

After receiving your VAT registration, you are legally required to prepare and maintain a range of business records so that the government can check and conduct inspections to make sure that the documents are correct. Even if you are a small business owner, you must keep records such as annual accounts, general ledgers, purchase daybooks, the invoice issued and received for authorities. It is also wise to keep track of the credit and debit scores. These records need to be updated and maintained for a period of time as per laws. You need to ensure that they are valid and ready when your business undergoes an audit.

5. Efficient Business:

There is an initial rise in cost for small business owners. The cost of administration and implementing the process primary among them, but the long term benefits are worth it. The services include replacing unproductive and outdated accounting systems. The VAT compliant systems help the business run more smoothly and efficiently than before. This way of working helps accumulate many long term benefits.

It is highly advisable to take the advice of a VAT consultant who can assist your business while registering for VAT. This will save your time, effort, and money.