How to Register VAT for a Freelancer in the UAE.
It has been a few months since the introduction of VAT in the UAE, and businesses are settling well into the VAT regime. Initial apprehensions of compliance and regulation are giving way to confidence in the system. Businesses due to their size and expertise have understood the rules and adapted well. There is increased VAT compliance by the individuals who have to follow some processes in order to remain in business. Unlike in other countries, freelancers from the UAE are now encouraged to properly create and manage their financial records for the purpose of taxing. After a freelancing business has been registered with the government, the individual is given a TRN number which they ought to mention on every invoice. For transparency purposes, freelancers from the UAE are now required by law to provide VAT invoices to their clients. These invoices should have their serial numbers and be in their sequence, mention the TRN number, and must have the total service cost and the VAT stated separately.
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:
1. Confirm whether you are eligible for VAT or not - As indicated earlier, freelancers are divided into three categories for the purposes of taxation. Check which bracket you fall into as per your income, whether you are eligible for a VAT or not. If yes, proceed to the next steps.
2.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 the UAE that offer freelancing licenses for a price. You will have to find out more about the free zones and their respective costs before getting licensed under one.
3.Register Yourself Online - The procedure of VAT registration is online based. After obtaining the required license, the freelancer must go to the portal of the Federal Tax Authority and create an account. After logging in, they need to register for VAT. They should keep the necessary documents handy while registering for VAT.
A list of all the documents required for VAT registration is given below:
- Certificate of Incorporation
- Trade license
- The Memorandum of Association (MOA) or The Articles of Association (AOA)
- Description of Business Activity
- Projected Future Revenues
- Freelancer Passport and a copy of the Emirates ID
- Bank Account Details
- Revenues Details for the last 12 months
- The Agreement by the Sponsor and the Custom Details will only be required if the freelancer deals in such kind of business.
After submitting all the documents mentioned above, the registration will be approved by the concerned Ministry, and the freelancer would be assigned a Tax Registration Number also known as TRN.
4. 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
5.File your tax returns - Freelancers have to file their tax returns quarterly without fail. Furthermore, ensure that your records are right as errors and discrepancies can lead to heavy penalties.
Like any other country, in the UAE it is essential to abide by the law to avoid heavy fines. In the past, companies that failed to abide by the law have received heavy penalties and even lost their license. It is advised that before you start working in the UAE, you must be well-versed with the laws in the UAE. You can get in touch with the relevant authorities if you have any questions. There are many government websites to assist you as well.
Get The VAT Service in Dubai From Expert
Risians Accounting is a leading accounting firm in Dubai. We have a special team who are experts in VAT Taxation or we can say master in this. They have 30+ years of working in taxation. They know well how to register, how to fill, how to claim for VAT return, etc. Our team knows the hundreds of ways that how we can save money on VAT without getting any plenty and legal action by FTA. We always say publicly we are the best UAE VAT service provider because of our team. If you have concerns related to taxation, accounting, auditing, etc feel free to contact us and get a free consultation.