If you are running a small business in UAE, you may have not registered for Value Added Tax (VAT) yet. For most small businesses, VAT registration is not necessary; however, it is something that requires consideration, most especially if you’re confident that the taxable supplies turnover of your business will hit the current threshold of AED 375,000 per year for mandatory registration.
Without the help of a VAT specialist, the process will be a nightmare. But, there are some hidden benefits small business owners enjoy from being VAT-registered which makes the process worth considering.
The business will be able to get VAT refunds.
If you are purchasing lots of goods for the business, you would want to be capable of claiming VAT back by the end of every fiscal year. If your business has been registered for VAT with the Federal Tax Authority (FTA), then you will be able to do so. Trust us with this fact: there is nothing better than the FTA giving refunds to your money!
For a business that will undergo voluntary VAT registration, it is allowed to get VAT refunds from the previous six months. This means if you have been doing business for the past six months, but you haven’t reached the threshold yet, being VAT-registered will let you reclaim VAT provided that you have kept invoices and records.
As soon as you’ve successfully registered for VAT voluntarily, don’t forget to follow the same exact rules as with other SMEs that are VAT-registered. Invoices and records have to be kept. VAT return filing has to be done with the help of a VAT specialist in UAE and the FTA has to be notified of all changes pertaining to the essential information regarding the business e.g. address.
The business can compete with major players in the industry.
For startups, owners would want them to grow and become established in the industry. More often than not, the best way in developing a client base that’s steady and loyal at the same time is by appearing to be bigger and competent in competing with the major players. Through the voluntary registration of VAT in UAE, which is possible if your annual turnover is AED 187,500 to AED 375,000 per year, your startup will be going places! You will have an edge over new small businesses that have not registered for VAT yet.
VAT registration can open new business opportunities.
Here is a reality check: most businesses, especially those that are established, will be hesitant in working with a startup unless it is registered for VAT in UAE. For a business to not be able to issue a proper invoice, it loses potential clients. This is not a good sign especially for growing small businesses. This is why it is best to get VAT-registered and provide clients the confidence from knowing that they are working with a reputable and serious business.
VAT registration eliminates the worry about reaching the VAT threshold.
For most small businesses, they unknowingly exceed the current mandatory VAT registration threshold. Once this happens and the FTA finds out, not being registered can get the business in a ton of trouble. Voluntarily registering for VAT will allow you to eliminate the worry of ending up with a fine or penalty from the FTA simply from an oversight.
VAT registered businesses get a tax registration number (TRN).
The tax registration number (TRN) that is provided following VAT registration provides customers and clients the confidence when dealing with a small business. The TRN that will be reflected in every invoice gives a successful image of the business as most people know VAT registration requires it to pass the voluntary or mandatory registration threshold.
If you’re running a small business and you are currently considering voluntary or mandatory VAT registration, we suggest you speak to our team of VAT specialists today for advice and guidance in the process. Before you do, check out the frequently asked questions of business owners regarding VAT in UAE below.
Will VAT be included in the prices of the goods and services I will be offering to customers?
VAT, as you may already now, is tax paid on goods and services. There are items that are exempt from taxation such as some types of property and financial transactions. Value Added Tax is normally added in prices of goods and services with some exemptions. Talk to a VAT expert to discuss your specific situation.
What are the examples of VAT exempt sales?
Transactions that are considered as VAT exempt include basic necessities e.g. transportation, books, lending activities, agricultural products, real estate properties, and tuition fees.
Will I be able to reclaim VAT in UAE?
VAT can be reclaimed if it is paid on goods or services for use of a business. If you are not running a business that has registered for VAT, then you can’t get a refund for VAT.