With the technological advancement and progress of society, the ways of its functioning and operationality are also changing. There was a time when people used to face tough times due to a lack of job opportunities. However, they are creating opportunities for themselves by doing freelancing. People of this era master a skill like photography, vlogging, blogging, graphic designing or any other thing, set their pay rate and start providing their services.
Initially, freelancers were considered non-serious people who were wasting their time by quitting a nine-to-five job. Their earnings were limited, and they did not fall in the bracket of taxpayers. However, during the last two to three years, freelancing has emerged so progressively that certain countries of the world have declared it a specific industry. Moreover, UAE has imposed a tax on them.
Are Freelancers Eligible For VAT?
Freelancers were off the limit of value-added tax until a few months ago. However, considering the income of freelancers, which is now exceeding the voluntary threshold, it has been declared mandatory for freelancer workers too.
If you also belong to the same circle and are unaware of the basic details, keep scrolling down this article, and you will get to explore a brief guide about VAT registration for freelancers in the UAE.
Top 6 Steps for Freelancers to Register For VAT
In most countries of the world, the taxpayer public has to declare their income and assets to the authorities. The authorities then take an estimate and follow the rules to make a tax statement for them, which they have to pay. However, the United Arab Emirates is different. The government has set a threshold, and people have to fulfill their responsibility accordingly to avoid penalties.
Here are some of the major steps freelancers need to follow in order to do VAT registration in the United Arab Emirates.
1. Check Your Eligibility
The very first step that the freelancers need to follow for their tax registration is checking their eligibility. VAT threshold is AED 375,000, at which registration is a must, while AED 187,000 to AED 375,000 is a voluntary range in which the freelancers can do as they wish. Checking eligibility is critical as gifts can also be considered as income. Most freelancers hire the best VAT consultancy services in Dubai to ensure they meet the criteria of registration and fulfill their responsibility efficiently.
2. Get Freelancing License
After checking your eligibility for value-added tax, the next step you need to follow is to get a freelancing license. Considering the new changes in policies and increasing success of freelancing, the authorities have declared it a niche. So, the freelancers have to get a license while specifying their areas of work before starting the registration process.
3. Initiate VAT Registration Process
The next step is initiating the VAT registration process. You need to follow the directions shared on the website of the federal tax authority. You have to open your account, share your income details and follow other requirements. For this you can also consult experts to take care of the registration process.
4. Maintain Your Financial Records
One of the key steps you have to take care of while registering for value-added tax is to maintain your financial records. The tax amount will be decided according to the financial statement and records. If you fail to follow it or pay less than expected, then the authorities can initiate a VAT audit.
5. File for VAT Returns
Another important step the freelancers need to follow for VAT registration is filing for VAT returns too. Once you have completed the initial registration and paid the tax amount, you can check return eligibility too. If the value of products or services changes, you can file for returns, which again requires registration. Moreover, you have to present the financial statements or invoices to claim returns.
6. Manage Deregistration Diligently
Lastly, if you are thinking about quitting freelancing and moving to some other business, or your revenue is getting lower than the threshold, you can deregister for VAT. For that, you have to follow the procedure efficiently, or you will have to pay penalties. You can also hire the best VAT consultancy to take care of your registration and deregistration process while you can maximize your benefits.
Follow VAT registration and deregistration processes to fulfill your responsibility!
Paying the value-added tax is the responsibility of every freelancer who has a basic earning that meets the threshold. Do not forget to get your freelancing license from the authorities. If you have any confusion, do not earn loss by ignoring the regulations. Contact the experts now and let them take care of your registration, VAT payments, as well as VAT returns and deregistration.
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