Value-added tax is one of the most important responsibilities of business organizations in the United Arab Emirates. This type of tax does not apply with a fixed rate, and the value or tax keeps changing with the increase or decrease in the value of goods and services. This condition is the source of confusion for most of the taxpayers.
On the other hand, several goods and services are exempted from VAT payment, which adds to startup businesses' confusion. They are not much aware of the criteria and conditions of VAT payment and invite penalties and fines.
If you are also a startup business owner, or are thinking about it, explore this article to get a comprehensive VAT guide for the UAE's startup business.
Business organizations operating for years and paying VAT can commit a few mistakes in the process. So, making few mistakes in VAT payment is quite expected from start-up business organizations. However, it will only add loss to your account so try to learn and perform better for your profitability.
Below mentioned are some of the top points start-up business owners should know about VAT.
Mandatory registration is the first category of VAT registration in the UAE. It is applicable when the taxable imports and supplies have exceeded the mandatory threshold during the last twelve months.
On the other hand, mandatory registration for VAT also needs if the taxable supplies and imports are expected to increase in the next three months. It requires proper calculation and expert skills. Therefore, most of the startup business owners hire the service of the best VAT consultancy to fulfill their responsibility for mandatory registration.
The second category of VAT registration in the UAE is voluntary registration. Contrary to mandatory registration, the startup business organization can opt for voluntary registration if their supplies and expenses have exceeded the voluntary threshold in the last twelve months. They can also go for such registration if they expect a rise in the next three months.
VAT threshold denotes the certain specific amount any business has earned during the past twelve months. In case of exceeding the amount, the business organization has the responsibility of registering for VAT. The mandatory VAT registration threshold in UAE is AED 375,000, while the voluntary VAT registration threshold is AED 187,500. Fines and penalties may apply over its violation.
One of the most important things the startup business organization needs to know about VAT is the deregistration process. Deregistration means that you will not pay VAT to the federal tax authority. The conditions for this ae following:
In other words, it means that your business is not generating enough profit that you need to pay value-added tax. Moreover, in the case of deregistration, the application should be filed within twenty days of your taxable supplies have stopped generating profit.
VAT return filing is another important condition for a start-up and other business owners in the UAE. It is a distinct condition that also requires a separate registration. However, it is also confused with VAT registration or deregistration.
The taxpayers can receive the amount back from the authorities in case of deemed value of their goods or services. It falls under various categories, and knowing about them in detail is essential to comply with VAT requirements in the United Arab Emirates.
The federal tax authority has implemented a few penalties and fines over incompliance with VAT in the region. The penalties are meant to regulate the payment of value-added tax. They are applicable in case of errors in VAT registration, deregistration, and return filing. The following are some common conditions;
If you want to avoid these penalties, you must comply with the requirements. You can hire the best VAT consultancy in Dubai to ensure proper registration and deregistration of VAT for our startup business and maximize your profits.
Value-added tax is here to stay. You cannot overlook the mistakes by paying a fine once or twice. You need to be well familiar with the conditions to save your hard-earned money. You can also rely on professional support and consult the experts to fulfill all the responsibilities on your behalf. So, contact the consultant and be sure to comply with all the VAT requirements and earn a good reputation in the business world.
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