One of the most important aspects of starting a business in the UAE free zone is managing your finances. The way you opt to track and record your finances can make or break your company over time. Hence, it’s important to build financial literacy for entrepreneurs.
Once you understand and opt for an ideal solution, your company can grow much faster and efficiently. Continue reading to learn about why it is important, how to manage it, VAT and more.
Financial literacy for business
When starting your company, the cost of license isn’t the only key expense that you need to take into consideration. Although it does play an important role, it definitely is not the only essential expense.
There are other crucial spendings that you have to take into consideration. These include salaries for your employees, marketing budget, operational costs, office rents and much more.
After the process of your company setup is complete, you will most likely need access to capital down the line. This can be accomplished through business financing.
Regardless of the size of the company, most businesses seek capital infusions in order to meet short-term obligations. In addition, accounting roles are often overlooked but in fact, it plays a crucial role in the way your company functions.
The hack to balance your business’ finances
- Maintain accurate records and track them regularly
- Ensure you have a separate bank account for your business to keep a clear records of the flow of cash within the organisation
- Set aside savings from your income to be prepared for any setbacks
- Set a clear budget and compare the spendings every month to ensure you stay on track
- Keep track of other records such as VAT as well
Understanding Value Added Tax and the importance of bookkeeping
Value Added Tax is often referred to as VAT in the UAE. It was introduced in 2018 on 1st January and has been implemented as the general consumption tax of goods and services. This applies to all goods exchanged within the territorial area of the UAE.
The Federal Tax Authority’s VAT eligibility criteria are dependent on a company’s total turnover and total taxable expenses. Once a company is formed, they can register for VAT under one of two categories.
- Vanzari totale
- Cheltuieli totale
These include the VAT amount paid for any expenses spent for your business. This could include costs such as VAT paid for machinery or other equipment. However, this is not applicable to tax paid internationally.
For instance, if you were to purchase machinery internationally and paid tax for the equipment’s spendings, it will not be included as VAT expenses in the UAE. It would instead be considered as 0 rated VAT.
You must also take into consideration of the two types of VAT registration services in the UAE:
1. Mandatory VAT Registration
2. Înregistrare voluntară în scopuri de TVA
Înregistrarea obligatorie în scopuri de TVA în Emiratele Arabe Unite
It is applicable on individuals or companies that have an annual turnover of AED 375,000 or more. If your business falls in this category, you are required to get a Tax Registration Number (TRN) to conduct your business in the UAE. You can then implement VAT on your supplies and collect VAT on behalf of the ALS. If you do not register for mandatory VAT, you will be required to pay a fine.
Ești eligibil să aplici pentru înregistrarea obligatorie în scopuri de TVA dacă îndeplinești oricare dintre următoarele criterii:
- Your business turnover and imports were over AED 375,000 during the last 12 months
OR - Anticipați că cifra de afaceri și importurile dvs. în următoarele 30 de zile vor depăși 375,000 AED
Înregistrare voluntară pentru TVA în Emiratele Arabe Unite
It can be applied by individuals or companies that have an annual turnover of over AED 187,500 but less than AED 375,000. If your business falls in this category, you may apply for VAT registration and get a TRN, voluntarily. Should you choose to not register for VAT, you will not be fined nor will you face any legal issues as long as your total turnover is still below AED 375,000.
Ești eligibil să aplici pentru Înregistrare voluntară în scopuri de TVA dacă îndepliniți oricare dintre următoarele criterii:
- Cifra de afaceri sau cheltuielile impozabile ale afacerii sau importurile au depășit 187,500 AED în ultimele 12 luni
OR - Anticipați că cifra de afaceri sau cheltuielile impozabile sau importurile din următoarele 30 de zile vor depăși 187,500 AED
When you do not have a Tax Registration Number (TRN), you are not eligible to mention VAT in your invoice. You will only be eligible to do so once your TRN has been generated. If you proceed to mention VAT in your invoice without a TRN number, there will be a penalty from the FTA. In addition, it is important to ensure that your company keeps records of all spendings and earnings of each year.
Need additional guidance?
Shuraa will help you get started with your company and ensure that the entire process runs smoothly.
Shuraa a fost una dintre companii de top în înființarea de afaceri în Emiratele Arabe Unite de peste 26 de ani. În plus, obiectivul nostru este de a ajuta antreprenorii să construiască o fundație în economia prosperă a Emiratelor Arabe Unite, de la început până la sfârșit.
Pentru a lua legătura cu consultanții noștri de afaceri experți, sunați-ne la +97144081900Trimiteți un mesaj WhatsApp pentru o solicitare de chat pe +971507775554. De asemenea, ne puteți trimite un e-mail la info@shuraa.com. You can also get in touch with our international tax experts, visit https://bit.ly/2Wphtcq.
