VAT (Value Added Tax) has been implemented in the UAE in the year 2018. Right after its implementation, it has become crucial for the UAE businesses to prepare themselves towards this new taxation system and be “VAT Ready” to avoid penalties related to VAT.
Before knowing the ways to avoid VAT penalties, it is must to know what exactly this term means. VAT penalty is defined as imposing monetary or non-monetary (if any) an obligation on the person in addition to his normal obligations. This forces the person to act in accordance with the legal requirements to avoid the consequences of non-compliance. Now let’s know about the steps to avoid penalties which could be as high as AED 20,000.
- Registration of VAT:
VAT registration in Dubai is necessary for all those companies that offer taxable goods& services. Companies that have annual revenue of AED 375,000 must register within 30 days as per the period prescribed by the Federal Tax Authority (FTA).
- Maintaining All Accounting & Bookkeeping Records:
As a basic guideline for proper management & control of the business operations in the UAE, it is compulsory to maintain proper records regularly. This can be best done by hiring accounting & bookkeeping firm in Dubai. Keeping a strong record of all the costs, business income and other associated VAT charges is the only means of evidence to be presented at the time of inspection by FTA.
- VAT Collection:
Another vital step to comply with the new VAT regulations is to collect VAT by the customers who are purchasing goods and services from your company. a value-added tax employs the credit-invoice method. Under this method, businesses are taxed on their sales at each stage of production but obtain credits for the taxes they paid on inputs.
- Know About the Zero Rates And Exempt Suppliers
Some businesses have been exempted from tax by the FTA. For the Zero-rated supplier, VAT is still taxable on the goods being supplied but at the rate of zero. Such as industries include jewelry, real estate developers, clinics and hospitals, airlines, &schools. As there are many things to know about the VAT, hiring professional VAT consultants in Dubai will be the best business decision to make. As they have good knowledge about this field & understand its applicability to ensure that you are on the right path.