Zero-Rated VAT for Companies in the UAE

Zero-rated vat agencies based totally in the UAE review their unique VAT application.

There are numerous customers who while being located here in the UAE, are using zero-rated supplies which begs the question, whether this person should consider registering themselves for VAT.

Many clients, who were part of the esteemed profits tax consultants, have been reported to register for vat during the closing of 2019, or else they would have faced banking problems with transactions.

Some of these clients even as far to confess that their institutions made them register for vat as they had large sums of money coming and going via their own accounts.

Which again begs the question that, what is the appropriate approach to registering for zero rated vat?

So we went ahead on your behalf and asked the FTA, their answer is as quoted;

‘If you only make zero-rated supplies, you can also follow to be excepted from registering for VAT.

You still need to complete a VAT registration application, but you should reply “Yes” to the question: “Are you applying for an exception from VAT registration?”

This actually means that if you have an organization in the UAE producing zero rated supplies, then it a dire necessity to have to register for vat in UAE with the FTA. The only problem is the softwares which need to be set up properly for them to work.

Let us put it into perspective that, all of our zero-rated buyers have put in the incorrect vat utility and can no longer declare that they are taking advantage of an exception to the generally followed rules.

Some of our customers have experienced losses or penalties of up to 20,000 AED because of asking for amendments in the wrong way. They failed to realize that all their supposed amendments needed to be made within the 20-day limit set by the FTA

So, it is our profound recommendation that you thoroughly check your initial vat application, and that it was made in the correct order. With that being stated, we can surely rely on the FTA to begin inquiries into companies who stated on their forms, sales of up to 6m AED but failed to reach that milestone.

 

4 Quick Facts About Registering for VAT in the UAE

THE TRUTH About VAT in the UAE

Registering for VAT in Dubai should not be taken gently and certainly now not regarded section of the process of operating in Dubai, you only need to register if you qualify or if you exceed a threshold. Failing to adhere to the Federal Tax Authorities in Dubai is a serious offense and can incur heavy penalties. Below are 7 records that you have to recognize earlier than registering for VAT in Dubai.

Individual Responsibility

When you register for VAT you are registering the character that is running a business, no longer the enterprise itself. Ultimately it is the character who will be accountable the vat and the duties that come with registering for VAT with the FTA. This duty ought to not be taken lightly and it is eventually linked returned to your Emirates ID.

A character can solely preserve one TRN for VAT purposes at any one time. It is your accountability to make sure that reproduction functions are not submitted.

When do I want to register for VAT?

There is no want to register for VAT with the FTA when beginning your change license. There is so a good deal incorrect advice on this matter. The principles requirements of VAT are constant and consequently, it is no longer a desire to register when setting up a company.

Mandatory Registration – if you meet the following criteria then you must register immediately:

  • Your turnover was once greater than AED 375,000 in the final 12 months; or
  • You anticipate that your turnover will be greater than AED 375,000 in the subsequent 30 days.

Voluntary Registration – if you meet the following criteria then it is your preference alternatively your next 12 months will play a vital element on whether you have to register voluntarily or not:

  • Either your turnover or charges (which will be difficult to VAT) have been extra than AED 187,500 in the ultimate 12 months; or
  • You assume that either your turnover or prices (which will be a challenge to VAT) will be extra than AED 187,500 in the subsequent 30 days.

Exemption from VAT

If you have an alternate license in the UAE (LLC or Freezone) and do not function in Dubai and obtain all profits from outside UAE, then you may qualify for exemption from VAT, but you nevertheless MUST practice for this through the FTA. Banks will request this and may also hold repayments as a result. This is also regarded as zero-rated supplies.

Branches are not separate felony entities

Only the entity of which they are branches practice for registration where that entity meets the applicable criteria. Even if you are running by using branches in extra than one Emirate, only one VAT registration is required.

Updating your details on the FTA portal to avoid AED 15,000 Penalty

keep up to date

AED 15,000 The failure of the Registrant to inform the Authority of any circumstance that requires the change of the information pertaining to his tax record saved by Authority

FTA in Dubai kingdom that if you fail to inform them of adjustments in any situations you will incur a penalty of AED 5,000 initially and AED 15,000 for repeating it.

The principal gadgets that go out of date are as follows:

  • Trade License
  • Emirates ID
  • Possible Passport Copy

The above are fundamental items that should always be updated when they are renewed, however the troubles arise when you are updating the items.

The FTA portal has been updated to make mandatory the need to encompass your financial institution account and power of authority, these objects had been not mandatory when many groups registered for their TRN wide variety in 2017.

Also for some agencies, the FTA uae requires them to grant a monetary announcement to verify the income and fee for the last 12 months. I would surely urge business owners to seek advice from a tax consultant when doing this as many groups are incorrectly registered for VAT and supplying such monetary statements ought to cause the FTA to request other information subsequently leading to a penalty of either AED 10,000 for failing to deregister or AED 3000++ for submitting and mistaken return.

To be sincere this is all it takes to preserve your FTA portal updated and in addition to the above the basics such as contact important points can only be up to date via an electronic mail to the FTA and not thru the portal.

Ali Afzal is the Managing Director and VAT accounting Consultant in UAE for Profits Plus Accountants registered as Profits Accounting and Bookkeeping a British Owner Managed Accounting Firm in Dubai. We manage over 100 clients vat submissions and cater for clients from around the World. We are registered with Xero Cloud Accounting as a Silver Tier Partner and our fees start from AED 850 per month. Contact me on [email protected] for more information.

 

Making Tax Digital in the UAE

making tax digital dubai

Filling out taxation forms and filing for returns is a time-consuming process, it can sap all our energy and disrupt our schedules but change is happening and tax authorities around the world are shifting from traditional filing methods to all integrated digital platforms often integrating with third-party software’s to capture the masses and make it easy for clients and advisors to partake in the digital tax revolution.

What is digital taxation?
Digital taxation is set to revolutionize the way businesses file for their taxes. No longer would business owners need to fill out self-assessment forms and prepare their taxes when software can handle all that for them. Digital taxation is the process of using compatible cloud accounting software to file taxes.

Cloud accounting software can also help with the day-to-day functionality of your business. They can help you track transactions, keep accounting records and prepare invoices. They can even help you avoid legal penalties by archiving and managing your records.

Making Tax Digital (MTD) in United Kingdom (UK)

When it comes to digital taxation, the UK is the undisputed frontrunner. UK Government’s non-ministerial tax collection wing, also known as Her Majesty’s Revenue and Customs (HRMC), is collaborating with accounting software developers to digitize the tax administration system by 2020 through its MTD campaign. The campaign aims to make tax collection simpler and error-free.

MTD replaces manual processes such as form filling and paperwork with accounting software. It also reduces the HRMC’s overhead expenses. It saves both time and money by standardizing the tax process through technology.
MTD requires VAT-registered businesses to maintain their records digitally. It is also compulsory for businesses to use the MTD software to file their returns before April 1, 2019.

UAE taxation system

Digital tax seems convenient and hassle-free so when will it be launched in UAE? The UAE government is also making attempts to digitize taxation procedures. Take, for instance, the digital stamps the Federal Tax Authority (FTA) introduced for tobacco products.

Yet, the progress remains slow and steady. Right now though, the UAE government only has an e-portal for taxation. Users can visit the portal to fill out their required information. The process remains manual since the portal is not synced with accounting software.

We can’t wait for when the UAE government introduces this system and simplifies the tax system.

How can digital platforms help with taxation?

Innovative digital platforms are sprouting up to assist people with their tax claims and planning. Platforms like the UK-based RD Vault can sync with accounting software to generate invoices, update books, prepare tax credit claims and track their progress. One such solution is Xero, a Cloud Accounting Software solution used by Profits Plus Accountants and tax consultants in Dubai.

Xero is an all-in-one solution, it can be used to prepare reports and maintain taxation records. This enables you to use one platform instead of a cluster of applications to deal with your accounting and taxation needs.

If you are interested in knowing how a cloud accounting software such a Xero, can help your business then feel free to get in touch with Mubashir Malik, Partner at Profits Plus Accountants in Dubai, UAE. Contact Mubashir by email on [email protected] or call on +97143180265.

 

Xero Cloud Accounting Partner in Dubai

Xero cloud accounting is one of the most exciting innovations in accounting. Profits Plus Accountants are a Silver Partner with Xero Cloud Accounting. More importantly, we engage with all clients through Xero Cloud Accounting and this approach earned us the title of ‘No.1 Xero Cloud Accounting Partner in the UAE’.

Currently, 95% of our clients are taking advantage of the free subscription offered to Xero Cloud Accounting software only available through Profits Plus Accountants. Similarly, you too can get your business on Xero Cloud Accounting and work with the only accounting company in the UAE dedicated to cloud accounting.

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VAT Submission Deadline [must know]

vat submission dealine

VAT Submission Deadline

VAT registered business owners have a responsibility to submit their VAT return to FTA on time every 3 months (the first submission period after you register will vary for each company). According to the FTA, AE, fine for the failure of the person conducting Business to keep the required records and other information specified in Tax Procedures Law and the Tax Law is AED 10,000 the first time and AED 50,000 if repeated.

Administrative penalties for violations have been issued by Cabinet Decision No. (40) of 2017 and can be found under the Legislation section on the AE FTA  portal.

VAT Submission Procedure

Every 3 months you need to calculate the difference between your input and output tax and submit the summary to the FTA AE with a breakdown of the emirates in which the sales were generated. Ideally, you should generate a P&L and Balance Sheet at the same time and there is a very good reason for doing this.

Although the deadline to submit your VAT return to the FTA is 28th of the following month after the VAT Period, you should submit the FTA VAT return to the FTA by the 25th. You need to give yourself enough time to make the VAT return payment to the FTA. To learn more about how to make the payment please refer to our blog post on Making A Payment To The FTA.

Profits Plus Accountants

We are a British Accounting Firm in the UAE based in Dubai, we help local businesses to navigate the FTA requirements and we use the most advanced cloud accounting software in the World to make sure that you remain 100% compliant.

Speak to Mubashir Malik, a Managing Partner at the firm. You can reach directly on email [email protected].

Note: www.profitsplus.ae is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.

 

Profit Margin Tax Scheme [Used Car Sales]

Profit margin tax is a value-added tax (VAT) scheme created by the FTA AE for the benefit of the used goods industry.

The scheme allows VAT to be applied only to the profit portion of the goods sold, provided full VAT has been charged on the goods previously.

Working Example

Ahmed buys a brand new car from a dealer in Dubai. He pays AED 100,000 plus 5% VAT. Regardless of how he purchases the car i.e. full cash or on finance VAT of 5% has been paid on the total value of the car. Now since he is a consumer and not a UAE business that has undergone VAT registration, he will NOT be able to claim for VAT return, according to the FTA rules.

6 months later Ahmed decides to sell the Car to Khaled (a used car dealer) based in Dubai. After agreeing on the price of AED 80,000 Khaled pays Ahmed in cash. Ahmed then sells the car through his showroom for a price of AED 85,000.

Let’s calculate his VAT liability

Purchase PriceAED 80,000
Selling PriceAED 85,000
ProfitAED 5,000
VAT Liability (5% of AED 5,000)AED 250

Common Mistakes

  1. Deducting expenses before calculating the Profit; there is no provision in any FTA portal publications that allow for the deduction of expenses on the used car before calculating the Profit element on which the VAT is applied. Therefore you cannot deduct car polishing, car repairs, and other expenses before calculating the Profit on which VAT is applicable.
  2. Charging Profit Margin Tax to used cars 2017 or earlier; Profit Margin Scheme can only be used for cars where the FULL VAThas been previously applied, therefore since cars previous to 2017 or earlier have not had the full vat applied it is not possible to apply the Profit Margin Scheme to these cars.

NOTE: Profit Margin Tax can still be applied to cars 2017 or earlier but only if the full vat was applied by a used car dealer in the chain of events.

If you are looking for an accountant in Dubai then speak to Mubashir Malik, a Managing Partner at the firm. You can reach him directly on [email protected].

Note: www.profitsplus.ae is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.

 

Why You Can’t Ignore Xero Cloud Accounting Software

The Evolution of Cloud Accounting 

In the past few years, we have witnessed the birth and rapid evolution of cloud computing, with more and more traditional services being replaced by their far more efficient, affordable and secure alternatives. Accounting is no different and thanks to the hectic pace technology are moving at, the question is no longer whether you should move to small business cloud accounting but rather, when.

Problems with traditional accounting software

The drawbacks of traditional accounting software in the UAE, certainly play a role in the shift to cloud accounting. The data in the traditional accounting software system isn’t up to date and neither is the software. What’s more, the software only works on one computer – the data needs to be manually transferred between devices, usually by virtue of USB drives. This presents a myriad of other issues, mostly to do with security and reliability.

Traditional accounting software and services in the UAE are outdated since they are rooted in the idea that only one person should have access to the data. This means that important people within your business may not have access to the financial and customer details, which impairs productivity and diminishes the level of customer service your organization can provide.

What’s more, traditional accounting software tends to be costly and updates and regular maintenance are expensive (often not included in the initial price), time-consuming and challenging especially if you’re not tech-savvy. Keeping backups is rarely one and even then, it may cost you more time and money than it’s worth.

When it comes to your company’s financial needs, you cannot afford to settle for outdated accounting services that charge you too much while bringing almost no value to the table. What you need is an experienced, qualified and pioneering accounting firm that will handle every single detail, provide you with cutting-edge accounting tools and allow you to focus on your company’s future growth instead of book-keeping.

What is cloud accounting?

Cloud accounting is the alternative to traditional accounting software, whether it’s on-premises or self-install. The only difference is that small business cloud accounting is hosted on remote servers, similar to the Software as Service business model: data is sent to the cloud where it can be processed and returned to the user.

This means that all functions are performed off-site, rather than on your desktop which minimizes issues related to reliability and security. All you need to take advantage of cloud computing is a reliable connection to the Internet or another network via a cloud application service provider. Because of that, cloud accounting is far more flexible than traditional software – the accounting data can be accessed from any point around the world and from any device that has an Internet connection. What’s more, cloud accounting software in the UAE like the one Profits Tax Consultants use can update your financial information automatically and provide you with real-time financial reporting.

Profits Plus is a cloud accounting firm based in Dubai that will go above and beyond to ensure that your company is provided with qualified accounting services and support your company’s growth and expansion. Our state-of-the-art small business cloud accounting partner software is run by experienced British accountants who have spent more than 20 years of working with British companies and VAT.

Xero Cloud Accounting Software in UAE

One of the key players in the shift towards cloud accounting is Xero, a New-Zealand-based software company that develops cloud-based software for small and medium-sized businesses. Their small business cloud accounting software lets companies share access to the latest business numbers with their teams, accountants and bookkeepers so everyone – including team members around the world – are kept in the loop and up to speed.

This means that you can easily log into any Xero file you want by simply using your Internet connection. You can share access with your accountant who in turn can not only open the file but make adjustments, prepare and lodge BAS and tax returns, and provide real-time assistance if needed. This saves up time and money as the accountant doesn’t necessarily have to send the data back and forth, either digitally or physically.

We at Profits Plus truly believe Xero accounting software has transformed the modern world of accounting in the UAE. Instead of having a monthly meeting with your accountant where you pile mountains and mountains of paper files, you can easily manage your accounting information in real-time. This helps you make faster and more effective decisions. Unsurprisingly, in the past 12 months alone, Xero has shipped more than 1,2000 features and product updates, most of them designed to provide accountants with back time and helping them migrate to methods of value-priced billing while increasing their workload at the same time.

Profits Plus is a 100% cloud-based accounting service, which means that you will be able to take advantage of the flexibility, convenience, and practicality of cloud service based on the Xero Small Business Cloud Accounting Software. In addition, we will integrate accounting systems inside your company, offer you book-keeping as well as expense management services that will enable you to monitor your company’s growth, expenses and earnings.

Benefits

In a nutshell, cloud accounting software like Xero enables professionals in the UAE to save time, and businesses to enjoy greater flexibility, reliability, and security when it comes to financial operations. Xero certified accountants can create a lot of efficiencies going beyond that of manual data entry: using the cloud service, they can finally have time to analyze the work and truly help small businesses remain cash flow-positive.

Some of the benefits associated with using cloud accounting software for business purposes in the UAE are increased accessibility, productivity, organizational reporting and improved back-up and recovery. Small business cloud accounting software can improve the productivity within your organization by saving you enough time to focus on actually running your business rather than spending valuable resources on bookkeeping and accounting.

What’s more, a Xero certified accountant can access your accounting and financial information from any point around the world. This makes it the ideal option for businesses that have remote employees or work with accountants from abroad. This also frees you from having to install and maintain software on individual desktop computers (so you can save money on your IT infrastructure and training expenses). With small business cloud accounting, you can also improve the communication within your business as employees in other departments, branch offices or remote areas can access the same data and version of the software, and make changes if needed.

Xero also makes it easier for you to get real-time reporting and visibility throughout your organization. With cloud computing, subscription-based models are the most popular option – you can pay a subscription to receive updates as soon as they’re launched, without having to invest more money in additional software purchases.

Xero also provides you with better backup and recovery capabilities. Xero, cloud accounting software, makes storing and recovering data more convenient and reliable than in-house servers. All these benefits also ensure cloud computing is one of the most, if not the most, cost-effective option on the market. If you’re looking for a Dubai accountant, working with someone who is Xero certified can save you a lot of time and expenses in terms of maintenance and management of data and servers.

What the future holds

Given the many benefits cloud accounting software in the UAE offers to small and medium businesses, it’s not surprising that experts believe that cloud accounting will become the new normal. What’s more, Xero and similar software may become even more important and relevant as AI and machine learning grows in popularity.

Since we are a 100% cloud-based firm, we are able to offer you high-value, low-cost accounting services by cutting down on conventional, obsolete and expensive hardware and software and passing those savings on to you and your brand. Our mission is to establish an honest, trusting and lasting relationship by going the extra mile and ensuring your satisfaction. Choosing Profits Plus means having a whole team of highly-experienced British accountants at your disposal.

If you’re looking for a UAE accountant but have not yet made the switch to cloud accounting software, it may be a good idea to put a framework in place as soon as possible. Steadily working towards a plan is the key to enhancing what you already have and prepare for the future – and by the looks of it, the future of accounting is synonymous with cloud accounting.

If you are looking for an accountant in Dubai then speak to Mubashir Malik, a Managing Partner at the firm. You can reach him directly on [email protected]

Note: www.profitsplus.ae is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.

 

Submitting a VAT Correction?

Considering submitting a correction to your previously submitted vat calculations?

If you become aware that a VAT Return that you have submitted previously contains errors that resulted in a calculation of payable tax not more than AED 10,000, then you can correct this error in the current VAT Return in which you have discovered the error. Under the “VAT Amount” column, you should only declare the VAT amount of the correction.

If the error has resulted in a calculation of payable tax of more than AED 10,000, you should make a Voluntary Disclosure. We would urge you to review the FTA publication named Voluntary Disclosure

To avoid doing this incorrectly contact the experts.

Profits Plus Accountants

We are a British Accounting Firm based in Dubai and we help businesses navigate the FTA requirements using the most advanced cloud accounting software in the World.

We make sure that you remain 100% compliant.

As a Silver Partner of Xero Cloud Accounting Software, we have a local team based in Dubai with over 20 years of experience (collectively).

If you are looking for an accountant in Dubai then speak to Manam Tariq, Senior Accountant at the firm. You can reach him on [email protected].

Note: www.profitsplus.ae is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.

What is a FAF File? [FTA Audit File]

fta audit file

The FTA has produced a very concise document on the required functions of accounting software which are needed to produce the FTA Audit files (“FAF”) for VAT and Excise Tax should they ever request it.

What is accounting software?

Accounting software should be a key part of any modern growing business whether a retail store or a service provider and it is not something reserved just for large corporations.

Currently, there are many accounting software solutions being used in the UAE the key players in the market are:

When selecting an accounting solution business owners should ensure that the solution complies with the FTA registration requirements.

Any competent accounting software should be able to produce Sales Invoice, Accounts Receivable, Accounts Payable, and General Ledger but the FTA has very specific requirements, namely the need to generate a FAF File.

FTA Audit File

FAF is something that could be requested by the FTA whilst conducting a periodic audit to ensure that tax and returns have been prepared correctly. It is strongly recommended that businesses check with their software vendors to make sure they are able to produce FTA Audit Files (FAF) if required, otherwise it would be a very costly exercise to do on-demand.

NOTE: It may be possible that your software is able to produce data in FAF but your accounting partner failed to implement and monitor the documenting of the transactions as per the FTA Requirements and you only realize when the FAF is requested at which point it could take weeks to rectify.

Key Elements to be present in the FTA Audit File (FAF) are:

  • Company Information such as Company Name and TRN No.
  • Master Files
    • Supplier File
      • Name of Supplier
      • Location of Supplier by Emirates
      • TRN No. if applicable
    • Customer File
      • Name of Customer
      • Location of Customer
      • TRN No. if applicable
    • Source Documents
      • Purchase Invoices, Imports, Credit Notes (with all details)
      • Sales Invoices, Credit Noted Issued to Customers (with all details)
      • Payments
        • Transaction Date
        • Payment Date
      • General Ledger
      • Product File

In summary, your accounting software must be able to produce all or any of the above if requested by the FTA during a periodic audit of your VAT Return.

Profits Plus Accountants

We are a British Accounting Firm based in Dubai and we help businesses navigate the FTA requirements using the cloud accounting software in the World.

We make sure that you remain 100% compliant.

As a Silver Partner of Xero Cloud Accounting Software, we have a local team based in Dubai with over 20 years of experience (collectively).

If you are looking for an accountant in Dubai then speak to Mubashir Malik, a Managing Partner at the firm. You can reach him directly on [email protected].

Note: www.profitsplus.ae is a domain belonging to Profits Accounting and Bookkeeping, an accounting and bookkeeping firm registered with Dubai Economy, Trade License No. 796316.