Entrepreneurs need to understand and learn how to manage their finances. The finance record can easily make or break the business over time. Financial literacy helps entrepreneurs to build their business faster and in an efficient manner. The understanding of the finances leads to providing an ideal solution which means the company can grow at a faster rate.
The expenses aren’t just limited to the cost of the license as there are a series of expenses that play an important role and are necessary each day to start the business. There are crucial expenses that users have to consider like paying rent or lease of the space, employee salaries, marketing budget, operational costs, and the list goes on.
When setting up a business join hands with FlyingColour Business Setup Services for smooth transactions and make an informed decision that can save cost and also help you manage the finances in a better way possible. Accounting is majorly ignored but it plays a major role in the functioning of the company. We provide a 360-degree approach and provide consultation in terms of pre-setup compliance to budgeting & forecasting to documentation to financial consultation to post setup compliance.
What is Value Added Tax & Importance of Bookkeeping?
Value Added Tax is one of the common taxes used in the UAE and it was first introduced in 2018 on 1st January. The VAT is implemented on the consumption tax of goods and services which is applied to all the goods exchanged in the territorial area of the UAE.
Federal Tax has made the VAT eligibility criteria that are dependent on the company’s total turnover and total taxable expenses. At the time of setting up business in the UAE, you are entitled to register for VAT under two categories such as total sales and total expenses. This is inclusive of the VAT amount paid for the business expenses such as machinery and the pieces of equipment.
In UAE there are two types of VAT registration services in UAE such as
- Mandatory VAT Registration.
- Voluntary VAT Registration.
What is Mandatory VAT Registration?
The mandatory VAT registration is for individuals and companies that have an annual turnover of around AED 375,000. If the business falls in this category, you are entitled to get a Tax registration number mandatorily to conduct the business in UAE.
The business should be eligible for Mandatory VAT Registration if you fall under these categories i.e.
- The imports and turnover are more than AED 375,000 in 12 months.
- The business turnover and import in the next 30 days will exceed more than AED 375,000.
What is Voluntary VAT Registration?
The individuals and companies that have a taxable turnover of more than AED 187,500 and less than 375,000. If you have business returns, you may apply for the VAT registration and get a TRN voluntarily. If you fail to do so, there aren’t any legal issues if the turnover stays under the AED 375,000.
When setting up business in the UAE, FlyingColour Business Setup Services takes care of all the services i.e. accounting, immigration, tax filing, and more.
To know more about financial obligations before or during setting up a business, contact our team of experts.