A couple of months have passed since VAT was introduced in the UAE, and the businesses are slowly settling into the new rules of the VAT regime. In spite of all the initial trepidation of regulation and compliance, businesses are slowly gaining confidence in this system. Most of the large scale businesses, because of their expertise and size, have understood and adapted the rules well. But, the self-employed individuals and freelancers are facing serious challenges in understanding the steps that are to be taken.
Understanding the Eligibility of Registering for VAT
Freelancers are divided into three categories for the purpose of VAT, and they are:
- If the revenue is more than AED 375,000, then the freelancer has to register for VAT
- If the revenue is between AED 187,500 and AED 375,000, then it is optional for the freelancer to register
- If the revenue is less than AED 187,500, then the freelancer cannot register
Revenue, in this case, includes reverse charge supplies, imports, exports i.e. the zero rated supplies, and the taxable supplies. It is also important for the freelancer to secure an income of over AED 187,500 in the past twelve months.
Steps to Register for VAT in UAE
If you are eligible to register for VAT in UAE, you will have to follow the steps given below:
Acquiring a license
A freelancer can only register for VAT after he has acquired a license. The freelancer has to get his employer’s permission to get a license, and then apply for one. There are multiple free zones in UAE that offers freelancing licenses for a price. You will have find out more about the free zones and their respective costs before getting licensed under one.
You will need to register online for VAT. So, after you get your license, go to the Federal Tax authority website and create your account. Keep all the necessary documents handy, login to your account, and start the process of registering. Some of the documents that you’ll need for the registration are:
- Incorporation certificate
- Trade license
- Description of your business
- Details of bank accounts
- Revenue details of the past year
- Future revenue projections
- Freelancer passport and Emirates ID
- AOA (The Articles of Association) or MOA (The Memorandum of Association)
After successful registration, you will get a Tax Registration Number (TRN) assigned to you by the concerned ministry
Maintaining financial records
This is an important step for you, even if you are not eligible to be registered for VAT. After all, you might not be eligible for VAT registrations, but your customers might be. So, they might need you to draft the invoices in a certain format or manner. Thus, you will have to keep your books updated and check all the financial records regularly.
VAT compliance also involves abiding by the following guidelines:
- Mentioning the TRN on each invoice drafted by you
- Keeping invoices numbered in a sequence
- Disclosing the additional VAT and the total cost separately
Filing VAT Returns on Time
You will have to file the VAT returns on each quarter. These returns need to be mentioned accurately, or else, the business will face heavy penalties. You will have to calculate the total input and output tax, and the difference between these two amounts is the amount that you will have to pay the government as a freelancer.
GCC Filings can make the process of VAT registrations a lot easier for you through their assistance. They also offer other important services like filing VAT returns in 2020, accounting, tax management, audit and assurance, and so on.