The UAE introduced Value Added Tax (VAT) on the consumption of goods and services in 2018. Since it came into effect, one of the key questions that usually arises is that as an SME what is the threshold and requirements to register and account for VAT?
As per the UAE law, all companies with Taxable Supplies greater than AED 375,000 over the last 12 months or next 30 days must mandatorily register within 30 days and account for VAT accordingly, while businesses with taxable supplies between AED 187,500 and AED 375,000 can voluntarily register for VAT.
You will need to keep proper financial accounting records and it is likely you will need to employ an expert professional to assist you through the on-going processes. You may need to undergo a training session for your team members to ensure they understand the requirements of VAT and how it affects business transactions. The VAT legislation is complex and in case a business fails to comply, the penalties that you would have to bear are significant.
To ensure your business is VAT compliant [https://www.creativezone.ae/uae-value-added-tax-vat-how-do-you-ensure-your-business-is-compliant/], you will incur significant costs in the short term such as pricing, cashflow, financial reporting, tax accounting, supply chain and compliance processes.
While there are multiple digital solutions available to assist your businesses through the VAT process, according to a survey by Tally Solution, 44% of UAE SMEs are still unaware of automated VAT solutions and continue to perform their daily tasks manually for VAT records and filing returns, which could potentially lead to errors.
For small businesses, these additional costs of compliance could potentially lead to higher operational costs and might cut into their profits. However, the cost of non-compliance could be even more. Penalties are set at a minimum of AED 500 and can go up to three times the amount of VAT liability that would have been payable for the period in question.
To ensure your business is VAT compliant and meets all the requirements, you can also chose to outsource your taxation and accounting needs to a Tax Agency
[https://www.cztaxaccounting.ae/what-is-a-tax-agency-and-why-is-it-vital-for-your-business-compliance/] such as Creative Zone Tax & Accounting (FTA-registered and approved Tax Agency in the UAE), where in a highly qualified and friendly team who have extensive experience with Tax in the UAE and are well versed in a wide range of financial reporting services including Accounting,
Bookkeeping, Auditing and VAT registration and Tax Returns filing. CZ Tax & Accounting also provides customized solutions as per your business needs.
For additional information about VAT compliance:
UAE VAT – How do you ensure your business is compliant?
What is a Tax Agency and why is it vital for your business?
VAT Registration and Deregistration in the UAE
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