Business owners have a lot of complexities to manage. They have spent time in shaping their businesses and crafting their goals. As revenue starts trickling in and everything going as planned, one may wonder if it is best to register for VAT.
People often have many misconceptions regarding VAT. In the United Arab Emirates, the current VAT threshold for voluntary registration is at AED 187,500. If a business exceeds AED 375,000 for its annual turnover, it will be mandated to register for VAT. As an entrepreneur running a business in UAE, registration for VAT may be the route that’s best for you as it can help ensure your business is ready to grow. VAT registration in UAE may also help create the impression that your business is larger and is well set up for success and further expansion.
That being said, it is also necessary to consider the benefits that you will be able to take advantage of if you register even when you’re still below the mandatory VAT registration threshold. Oftentimes, voluntary VAT registration poses a myriad of advantages to a business; however, there is a chance that it affects the business’ financial health negatively. So, in order to answer your common questions, we have put together this article in order to analyze whether or not voluntary VAT registration in UAE is the most sensible and beneficial option you have. Let’s get right into it!
Boosting your business through voluntary VAT registration
Startups and small businesses often operate in a challenging market. If you are operating one, then you know this as a fact, especially when you have different goals to achieve. Growth, staff members, turnover – all these are big aspirations; however, you’re also always reminded that you’re competing against massive corporations.
In cases like this, registering for VAT in UAE voluntarily will help your small business appear much bigger and established than it is currently. Clients and consumers in UAE are aware of the fact that it takes a huge company to be able to operate while being VAT registered. This means they’ll automatically make the assumption that your annual turnover is of a considerable amount. Take note: voluntarily undergoing VAT registration will help you stand together with your major competitors, as well as boost the business’ reputation among its target market.
Boosting revenue through voluntary VAT registration in UAE
There’s a long list of financial benefits that you can enjoy if you are running a small business that’s been registered for VAT, either mandatorily or voluntarily. The financial benefits will be able to add to your business revenue.
With voluntary VAT registration, you immediately avoid angry letters from tax authorities in the country e.g. when your annual turnover reaches over the VAT threshold without your knowledge. Failing to register will most certainly land your business a nasty administrative fine and penalty. With VAT registration that’s performed voluntarily, you are eliminating the worries of reaching the threshold without your knowledge and without notifying the tax authorities in UAE in time.
This means you will be saving yourself thousands as you’ve avoided hefty fines and penalties. Better still, you’ll receive money back through VAT refunds. The accountant you have hired for your business can advise you regarding this topic and make sure that you’re taking the best route or course of action not just for your business but for you as well. If you want to know what we think regarding VAT refunds, check out this guide.
With regards to VAT reclaims, it’s also essential to seek the help of experts as you’ll need valid invoices and other documentation in order to provide sufficient proof that purchases that you want refunded are for business use.
However, it’s important that you remember the fact that charging VAT, which is currently at five percent, can increase the prices of your goods and/or services. This won’t affect customers that are VAT-registered, fortunately, as they’ll be able to file for VAT reclaims in UAE. As a business entity that’s VAT registered, you’re able to claim back VAT that you paid on goods or services if they are for the business.
The money that you can claim back from the Federal Tax Authority will help towards the growth and expansion of your business. You can easily reinvest the refunds back into the business in order to help you reach your business goals. You also have the option of storing the money away in case you will require it for future business investments.
Our team will be able to provide you with more advice and guidance regarding VAT registration in UAE. Talk to us so we can discuss your specific situation and concerns. Our regulated tax agents in UAE can also analyze whether or not you will be able to benefit from VAT registration.