Think you don't need to register for VAT? Think again
There is a good chance that the VAT might affect the way you do business indirectly
Businesses in the UAE that are comfortably sitting back because they don't need to register for value added tax (VAT), can't afford to take a break, because there is a good chance that the VAT might affect the way they do business indirectly.
Experts speaking at the VAT Clinic event at the Khaleej Times office on Saturday, were of the mind that even if a business need not register for the VAT today, then they might have to tomorrow.
According to the UAE Ministry of Finance, a business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of Dh375,000. Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of Dh187,500.
Pratik Shah, partner at Dhruva Advisors, said that VAT is going to be applicable in the entire ecosystem, and that this is something that businesses need to understand, whether they need to register or not.
"You cannot afford to stay aloof in VAT compliance by saying that my turnover is not crossing the threshold, so I need not worry about it," he said.
"Even if your current turnover is not above the threshold limit, you might have customers and different vendors that do fall in the VAT bracket, who will ask you to issue invoices in a particular manner, or follow a particular form of transactions. This means that you have to step into the mainstream; and I believe that many businesses would easily be able to reach the current limit set by the government," he pointed out.
Shah also advised businesses to gear up their accounting systems right away.
"Ensure that your basic accounting system or software is completely adequate when it comes to invoicing requirements. You need not have a tax registration number, but look into all the other back end particulars. Start maintaining your records in such a manner in advance, so that when the day comes when you cross the threshold limit, you aren't going to find it as a titanic change. Be sure that you are already part of the ecosystem," he added.
Mahmood Bangara, vice-chairman of the Institute of Chartered Accountants of India - Dubai chapter, also offered his thoughts and noted that businesses have to look at their own systems. "At the end of the day, businesses in the UAE have to see the requirements that are needed to file the returns of the VAT. These should come automatically. If they don't align these properly, then there will be huge problems. I feel that the majority of the issues that are coming up today, with regards to VAT compliance, is not about the clarity of the law, but more about how businesses are going to handle it."
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