Goods and service taxes are taking over almost every aspect in the market now days in lightning fast speed. The emergence had changed how purchasers and sellers vended and invested on items and the economic structure of a business as well as the entire nation. Initially VAT that is value added tax was a part of only a few products and services, however, now the categorizations of value added tax imposition have wide-spread. If you are an owner and your trade turnover is extending five lakh INR, you are definitely going to require a VAT registration number. Any established business will need to go for a registration as per their overall revenue. Take a look at what to do next once your business is registered and more importantly how to calculate value added tax to implement the same aptly for your business.
A Brief Explanation on How VAT works in the UAE?
The UAE is known for imposing value added tax registered trading entities at a percentage of five percent. This is based on a taxable manufacture and supply of products and services at every stage of supply chain. Not only are that, but even the tourists in UAE supposed to pay value added tax at a specific point of sale.
What to do Next When your Business is VAT Registered
Value added taxes are one of the most significant sources of income for businesses and it is imperative that you get your business VAT registered. So, before diving towards VAT calculation you will need to follow certain steps once your business is registered. The first thing you will need to do is to induce a charge of 20% on products and services you are selling to consumers as well as other businesses. Similarly, you will need to pay the charged VAT to other businesses if you are purchasing raw materials for your business and lastly file VAT return to HMRC at every quarter. These are the fundamentals of VAT registration that you will need to comprehend when starting to calculate.
The Basic Way of Calculating VAT in UAE
This is one of the most common methods to calculate VAT in the UAE. Consider the gross percentage of any amount of the products you need to buy or sell, which is the whole including VAT and divide by 117.5, if the rate of VAT is 17.5 %. The next step is to multiply the outcome from step number one by hundred to attain the pre-VAT total to reach the value added text element in the bill. The net amount then needs to be reported to the regional tax office.
Other than that, there is also a particular formula via which VAT is calculated which is VAT = OUTPUT TAX – INPUT TAX. This formula makes it easy for one to breakdown the complexities of VAT evaluation and fastens the procedure. There are also online calculators available but these methods are applicable for VAT calculation in case of personal or business aspects.