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Influence of VAT on Newly Registered Companies in UAE

17/02/2021

Value Added Tax (VAT) is a consumption tax fixed on a product when a value is computed at every step of the supply chain, right from production to the point of sale. It is not a tax that is paid toward the year's end or after deduction of profit or loss computation. The use of VAT won't just influence the accounting strategies, yet its impact will be seen all over the areas in a firm.  A VAT is an indirect tax charged on the end consumer for the consumption of goods & services being elected by them. VAT systems in the UAE not only affect its end-user, buyers & consumers but also have a wider impact on commercial institutions & businesses in the UAE. When it comes to VAT implementation of newly Registered Business, various factors can affect it in many ways such as:

VAT Eligible Goods

The VAT isn't required on all the goods & services. There are additional supplies with VAT rates fixed as zero which are called Zero-Rated supplies. The new organizations enrolling in the UAE should comprehend whether the services or products offered by the organization are under the VAT umbrella. If the new business' products go under the umbrella of VAT, then the novel business needs to apply for VAT registration, considering different components.

VAT Registration

If an organization is handling VAT-exempted goods, they won't need to register for VAT. The UAE government has given clear rules with respect to VAT Registration. Every business whose taxable supplies & imports surpass AED 375,000 consistently are compulsorily needed to get their business registered for VAT. The Federal Tax Authority gives the alternative to the organizations whose taxable supplies surpass AED 187,500  whether to enroll themselves or not. The organizations with taxable supplies & imports underneath the voluntary registration limit won't need any VAT registration.

Tax Group

Normally a tax group is formed when at least two firms or LLC(Limited Liability Companies) are enrolled as a single entity for the VAT purposes as indicated by the UAE VAT Decree-law. Though, the firms needed to stick to specific conditions indicated to frame the tax group. The final decision of tax group formation is taken by  FTA authorities.

VAT Filings

The businesses that registered for VAT are mandatory to file the periodic VAT Returns. The vast majority of the organizations enlisted for VAT should file quarterly VAT returns. Anyhow, certain businesses are likewise needed to file month-to-month VAT returns. The FTA specifies the specific vat return timing during the vat registration procedures, so one has to follow this to submit the VAT returns to avoid the heavy fines & penalties if any errors occur. Moreover, the businesses require to characterize their taxable supplies as standard-rated such as VAT exempt supplies, intra GCC supplies, zero-rated supplies & reverse charge supplies.

Penalties & Offences

Assume any business registered in the UAE doesn't stick to the principles indicated by the Decree-law. Then, it is considered as a VAT offense, and fines or penalties are forced likewise. The penalties will impact money-related fines ranging from AED 1,000 to AED 20,000 relying on the offense committed. So, all newly registered businesses are required to comprehend and adhere to the rule and regulations of VAT in the UAE for the successful running of their business in this domain.

Looking for The Best VAT Consultancy Services In UAE?

If you are still unsure about how the VAT system will exactly affect your business, or whether you are operating in line with the VAT laws, seek the advice of ARC Associates, best VAT consultancy services in UAE, will appreciate the working of your business & then provide a tailored solution accordingly. With a team of professionals and well-experienced accountants, we can work towards your goals and wants, & you can be reliable over ARC Associates services, with the highest proficiency. So, stop nerve-wracking with your newly registered business accounting matters and its further procedures, do get in touch with us today, we would be glad to help you!!!

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