Registering the business under VAT UAE
Businesses that aren’t mandatorily required to register for VAT are offered voluntary VAT registration if the annual supplies or the taxable expenses incurred on the business are not less than the voluntary registration threshold limit. As you register the company for the VAT, the government acknowledges your business, which aids certain financial benefits unlike for unregistered businesses in UAE.
Who should get registered under VAT
As mentioned, not all businesses are subjected to registering under VAT. Those businesses crossing the set annual turnover threshold are subjected to registering under VAT. A business is required to register for VAT if its taxable supplies and imports exceed AED 375,000 per annum. For businesses whose supplies and imports exceed 187,500 per annum, VAT registration is optional. As simplified, one can go for voluntary VAT registration if 12 months’ revenue is close to 187,500 AED and mandatory registration if the value exceeds 375,000 AED or 100,000 USD. While the law allows you to voluntarily register for VAT, let’s see what business benefits await a registered business.
The privilege of input tax deductions
A registered business under VAT can claim input tax deductions. The total VAT paid on the purchase is input VAT and the total VAT collected on sales is known as output VAT. If the input VAT is 335 and the output VAT 450, you are eligible for the entitlement of an input VAT deduction against the output VAT of 450, making the final VAT payable 115. Such an input tax claim can be put forward only if you have registered your business under VAT. Or else, the total VAT paid on purchases is expected to be considered as a cost.
Tax refund for new businesses
Even when the sales do not exceed the threshold but the expenses do, one can apply for VAT registration. For a new business or startup, the initial spending or investment is of a higher amount and takes time for the sales to establish with profit. In such a case, being registered under VAT will let you claim the VAT paid on your purchases/expenses which otherwise would be calculated as cost.
Any registered businesses under VAT can claim input tax deduction upon the premises of VAT. When a non-registered business pays 5% VAT on purchases/expenses, it makes your business/product 5% pricier as compared to a registered business. When you are not registered for VAT, the VAT paid on purchase should be treated as a cost leaving you without an option but to just inflate the price.
Apart from all these, having registered under VAT provides the business with a VAT registration number adding credibility to your business. This can help you build your business and also gives the company a professional position.
MAATS services in VAT
MAATS the leading accounting service in Dubai has got a dedicated team of VAT registration in Dubai specialists open for consultation anytime. Our strategies have proven to make the procedures of VAT registration simple and timebound. Feel free to reach out to us with VAT-related queries.
