The government of UAE introduced Value-Added Tax (VAT) on 1 January 2018 to diversify its revenue source, secure its national fund for the improvement of public services, and reduce its dependence on oil.
The UAE is among the earliest countries to start a fully electronic paperless tax system, which proves the highest international standards it complies with.
There was a positive effect of VAT on the government with a significant rise in its global numbers. However, the existing businesses that adhere to the general guidelines for obligatory and voluntary VAT registration were the main concerns because failing VAT registration is a violation of the UAE law. Failure to apply for registration can invite penalties to start from AED 20,000 within the time limit defined by the tax law.
Once a year has passed, deregistration from VAT is evenly necessary. You need to be aware of the rules for deregistration and submit the application within the defined time frame to avoid a fine of AED 10,000 for late deregistration.
If you are a business owner or looking forward to establishing a business setup in Dubai or any other Emirate the tips listed below are worth considering to protect your business from plausible penalties:
Know the Law
Following strict policies and the rigorous monitoring of the Federal Tax Authority (FTA) for business compliance, you must keep yourself informed about the new law to avoid any breach. In addition, FTA does more investigation to ensure compliance. Therefore, you need to remain updated about the developments in taxation.
Maintain Your Accounts Records
Maintenance of your accounts records accurately is one of the essential measures of Value Added Tax in your business setup. The use of FTA accredited accounting software can ease the process of maintaining your records. If you fail to keep, you and your business will be in a risky situation and may invite fines. However, regular accounting will save you from committing breaches.
Create Reminders for all your VAT Liability
After you have successfully registered for VAT:
- Make yourself informed about the liabilities that are of equal importance.
- Keep everything in order and maintain records of your tax-related activities, such as tax return filing.
- Adhere to the law and always keep yourself updated about all the relevant information related to company formation and business setup for smooth functioning.
Training Your Team Regularly
Providing necessary training to your team regularly is vital to keep them aware of the UAE taxation system. If need, invest your time in workshops. Training will keep your team’s confidence level high in dealing with complicated tax-related tasks. Many firms in Dubai conduct free monthly seminars and workshops to assist startups, new entrepreneurs and SMEs in the UAE. It is crucial to ensure your clients are aware of the law and the current tax system in the country.
Take Professionals Help for Accurate Financial Management
Seek professional advice whenever you feel the necessity to build a robust financial management system for your business setup. Ensure transparency and accuracy of all your records. If you do not have any streamlined process existing in your system, hire professional taxation and financial management expert who can provide you with personalised services that you may need during company formation.