Accounting and Bookkeeping Policies in Dubai

The UAE has its own set of GAAP accounting principles. The International Federation of Accountants (IFAC) is in charge of maintaining these standards. The GAAP principles apply to all the UAE government entities and state-owned companies.

The accounting standards of the UAE are based on the following principles:

Income is recognised when it is realised or realisable. Expenses are recognised when they are incurred. Revenue is recognised when it is earned.

You should measure assets and liabilities at fair value, except for financial instruments and leases. These are measured at amortised cost using the effective interest rates.

Running your own business in Dubai is a fun challenge. However, it can also be a struggle when it comes to accounting and bookkeeping. Here are five policies you need to follow:

Record Keeping Policy

Under the UAE Federal Law, you should keep your financial records and statements. You must ensure those records are intact for at least five years. The Ministry of Finance recommends keeping records for ten years to prove tax compliance.

Cash Receipts

Transactions of up to AED 1,000 need evidence supported by a receipt. Receipts must be in the name of the business. They must include the date of issue, signature of the person issuing the receipt, and recipient.

You must also indicate the amount and nature of the transaction. The details are essential for proof of transactions. They also improve accounting accuracy.

Bank Transactions

All bank transactions need the support of a bank statement. The statement must include the date of the transaction and the name and address of the business receiving the funds. You also need to include the amount and nature of the transaction.

Companies can keep an electronic record of the statements. Keeping these records helps in accurately preparing an annual budget and profit and loss accounts.

VAT Returns

Businesses operating in UAE must comply with Value Added Tax (VAT) regime, effected on January 1st 2018. The new tax applies to all companies in UAE, whether your services are local or outside UAE.

Businesses are required to register for VAT if they meet the eligibility criteria. Taxes in Dubai can be a complex matter. As such, your business should adopt a VAT Return Policy that makes sense. It should be in line with industry best practices.

Other Supporting Documents

Other supporting documents include invoices, credit notes and contracts. Also, include bank statements for businesses that are not registered for VAT.

The above documents should be in their original form. Copies of the documents are not acceptable.

How to Keep Your Business Accounting Records in Order in Dubai

Many small businesses attempt to do their books. This is common when a firm doesn’t want to spend money on accounting firms. Business owners also think they can keep things more “in-house.”

However, this often leads to a lot of stress and time wasted. Accounting is complex and a full-time job in itself. If you are running a business, you likely already have enough on your plate.

Instead of doing everything by yourself, consider the following options:

Hiring Accounting Staff

This involves getting an in-house permanent accounting employee. Depending on your company’s size, you can hire one or a team of accountants. The hiring process involves posting the job offer on your website or job websites.

You interview several candidates until you find the perfect fit. Some of the qualifications you should look for include experience in reconciliation, monitoring/recording accounts payables and accounts receivables transactions, basic bookkeeping and financial reporting. If you are lucky to find a reliable accounting staff member, they can handle all accounting operations. Alternatively, you can use outsourced accounting services in the UAE

Outsourcing Accounting Services

Accounting outsourcing is the transfer of accounting functions to third party accounting firms. This includes services like bookkeeping, tax preparation and financial statement preparation. You can outsource these services to an independent professional firm that specialises in that particular industry.

Outsourced accounting services take over the day-to-day tasks of your accounting department. You can choose to outsource all accounting operations or some hectic ones. Here are some of the most popular outsourced accounting services:

Payroll

Payroll is one of the top reasons why companies outsource their accounting. Payroll is complex and requires specialised knowledge and expertise.

Accounts Payable

This is the department that pays your bills. The person who handles accounts payable must be very detail-oriented and knowledgeable about tax laws.

Accounts Receivable

This department is responsible for collecting money from your customers. If your business offers its services and products on credit, you need agile management of these records. Poor management of accounts receivable can run your business into bankruptcy.

Bookkeeping

Bookkeeping is the process of recording your financial transactions. This can be done manually or electronically. When dealing with virtual accounting companies, you have to do it electronically.

Budgeting

Budgeting is the process of planning your finances. It involves determining how much money you will make and how much you will spend.

Tax Accounting

Tax accounting is the process of preparing tax returns for your business. The firm will also calculate income taxes payable by your business.

Tax accounting is different from financial accounting. You are better off having an expert who does both of these accounting tasks.

A company may outsource their accounting because they don’t have the staff to handle these tasks. Whatever the reason, it can be a more cost-effective alternative than hiring permanent employees.

Benefits of Outsourcing Business Accounting Services in Dubai

Hiring the right accounting firm can be your first step towards outsourcing business accounting services in Dubai. These firms have expert accountants. They help you with everything related to financial accounting and reporting.

You can easily outsource your bookkeeping or accounting services online. Below are critical reasons for outsourced accounting services in Dubai:

Cost-Effective

Outsourcing your accounting and finance operations is cost-effective. There is no need to pay someone on a full-time basis. One full-time employee could cost you up to AED 293,638 per year.

Hiring permanent employees to manage your accounts attracts the following expenses:

• Pension
• Health insurance costs
• Hiring costs
• Training and professional development

Remember, you might need to hire several employees to manage your accounts. This translates to higher salary costs.

Outsourcing cuts these overhead costs and makes your business is more profitable. Outsourced accounting services can be done on a contractual basis. With the tight economy, business owners are looking for cost-effective solutions.

Get Experts and Professionals

Outsourcing accounting services to a professional accounting agency allows you to work with experts. Every business needs an accounting expert. All successful companies have someone on their team who stays on top of their numbers.

You need to know how much money you are making and how much you are spending. Accounting experts help with the following:

• Research and development of financial models
• Consulting on operational improvements
• Implementation of business process reengineering tools

A competent accountant knows how to align your accounts with the business goals. An expert helps you grow your business, reduce costs and make smart decisions. They will also provide the expertise that helps you manage tax and legal issues.

Choose a competent accounting company. You can check their offshore company licenses to confirm their credibility.

Stay Focused on Your Business

Bookkeeping is one of the most critical aspects of an organisation. It is the documentation of financial transactions and records. Accounting and bookkeeping are tedious and complex jobs.

There are several reasons behind this complexity.

The accountant has many responsibilities to fulfil. They need to ensure all transactions are documented and accounted for. This can be overwhelming when the company has a lot of transactions taking place.

There are many types of documents that need to be maintained. These include cash receipts, bank statements, and cheque stubs. The accountant needs to ensure that all these documents are stored safely, and the information is easily accessible.

It will require more than 60 hours per week to manage your accounting. This draws your attention from other business operations like customer service, partnerships, and others.

Outsourcing your accounting operations frees up time for other operations. It allows you to focus on important business operations.

Meet Statutory Requirements and Regulations

Have you ever opened your mail to find a letter from the taxman? The reason behind this letter is that you may not have filed your taxes.

The UAE has introduced VAT in 2018 and is planning to introduce corporate tax in 2023. It is best to make sure your company’s books are in order and updated to prepare for any tax audit or reporting requirements. This can help you ensure your business complies with the country’s tax regulations, among other corporate requirements.

Here are some legal benefits of outsourcing your accounting:

• Meet statutory and regulatory requirements
• Avoid penalties and interest charges by paying bills on time
• Have an easier time staying in compliance with all filing deadlines
• Reduce the risk of facing a lawsuit for non-compliance with laws and regulations

Accounting outsourcing companies have the experience to help your business avoid legal issues. They are well informed of UAE bookkeeping standards. They keep your records as per the set legal standards and advise on minimizing legal risks.

Address Labor Shortage Problems

Talent is the lifeblood of a successful company. You need professionals to meet your accounting needs. Businesses in the UAE have been facing a shortage of skilled workers for years.

Dubai is now specifically facing a shortage of accounting staff. The problem stems from the increased competition for employees.

Employers have a hard time finding the best candidates for their vacancies. When they do, it’s difficult to retain them. Despite government policies to help retain accounting staff, it continues to be hard.

For instance, the government requires an accountant to work for at least two years before they can resign. If he quits before that time, he pays back the salary and benefits.

Outsourcing helps your company avoid labour shortage and retention problems. You have access to competent accountants beyond Dubai.

Reap the Benefits of the Latest Technology

Outsourcing accounting services allows you to utilise the latest technology. With a virtual team of accountants, you implement cloud computing and new software programs. This can increase efficiency.

Accounting agencies invest in emerging technologies to improve efficiency. Investing in new technologies can be costly. As new technology emerges, you have to upgrade to new systems.

Outsourcing with such firms allows you to use the latest technologies without the need to invest extra.

You get to keep your accounting in order using specialised accounting software. This automates accounting tasks. This organises your invoicing process manages inventory and other calculations.

Bookkeeping and accounting have undergone a radical change over the past few years. Many companies use cloud-based services to store client data and keep track of finances. You need to maintain a competitive edge by investing in the latest technologies.

Work With the Best Accounting Outsourcing Company

Although outsourcing business accounting services in Dubai is beneficial, you need to work with the best to enjoy the benefits.

Infinite services offer reliable business support services to help your business realise its potential. Our team can help you with accounting, bookkeeping, payroll, and VAT. Our goal is to offer advisory services and allow you to focus on your business.

Book a free consultation with one of our company specialists

VAT Registration in UAE

The United Arab Emirates (UAE) has become one of the world’s thriving business markets and an ideal destination for international investment. If you are a business owner in the UAE or want to start a business in UAE.  you must assess the requirement to register the business under VAT regulations. Infinite services, with its team of experts, offers a variety of VAT services, including UAE VAT registration services.

By registering your business under UAE VAT legislation, it means the government has validated your business. The revenue generated by your firm will determine whether or not you need to register your business for VAT in the UAE. One of the top VAT registration services in UAE is offered by Infinite services. We will assist you through the steps regarding how to register VAT in UAE.

Documents required for VAT registration in Dubai – UAE

The method and procedure for VAT registration in the UAE is rather straightforward, and to register for VAT, one needs to provide the following documents.

• A copy of your business license
• The company’s Memorandum of Association (MOA)
• A copy of the Emirates ID held by the owner and partners
• Details of the business and the bank account
• The income statement for the previous 12 months
• Copy of the company owner’s and partners’ passports
• The structure of the business and the action plan

Types of VAT Registration in UAE

1. Mandatory Registration

It is mandatory for a company to register for VAT:

• If the total amount of its taxable supplies and imports during the past 12 months reaches the mandatory threshold; or
• If the total amount of the company’s taxable supplies and imports is expected to surpass the mandatory registration threshold in the next 30 days.

1. Voluntary Registration

Voluntary Registration is an option for a business:

• If the total amount of its taxable supply, imports, or taxable costs in the previous 12 months exceeds the voluntary registration threshold; or
• If the entire amount of the business’s taxable supplies, imports, or taxable costs is expected to surpass the voluntary registration threshold in the next 30 days.

Limit of Threshold

Businesses having an annual revenue of more than AED 375,000 must register and account for VAT by law, while those with an annual turnover of between AED 187,500 and AED 375,000 can register voluntarily.

Registration of VAT Groups in UAE

The VAT Group Registration procedure involves two or more enterprises forming a group with the purpose of paying a single tax. After registering under the Group VAT scheme, the entities in question acquire a unified VAT number and can submit a single return. A VAT group allows persons and enterprises that are economically, socially, linked to operate as if they are one VAT entity. The parties involved must satisfy the following standards in order to form a VAT group:

• Every participant ought to have a fixed establishment in the UAE [a ‘fixed establishment’ is a site where a company is officially registered in the UAE or where key management choices are taken and management responsibilities are performed].
• The relevant stakeholders should be linked on a social, economic, or legal basis.

The benefits of VAT Group Registration for businesses are as follows:

• For VAT purposes, all businesses within a VAT group shall be recognized as “ONE” entity. This would help businesses streamline VAT accounting and monitoring operations like VAT returns, which must be created and lodged at the group level rather than the company level.
• Any supplies made within a VAT group’s entities are not subject to VAT and are considered as Out of Scope or disregarded supplies On the other hand, supplies made by the VAT group to entities outside the VAT group are liable to VAT.

Sectors exempted from VAT

VAT exemption will be granted to the following types of goods and services:

• The provision of some financial services (clarified in VAT legislation)
• Residential Properties
• Bare land
• Passenger transport in the local area

 VAT Penalties in UAE

If companies violate VAT legislation in the UAE, they will be subject to substantial FTA VAT fines. Businesses must maintain VAT compliance in accordance with the FTA in order to avoid VAT fines and penalties. Before integrating VAT in the organization, they must confer with a tax specialist.

• AED 10,000 fine for late VAT registration Failure to pay the tax reported in the tax return form within the timeframe required by the tax legislation results in late VAT payment penalties. The penalty for not paying VAT on time will be as follows:
• A penalty of 2% of the unpaid tax is levied the next day of due date.
• Any sum that is still outstanding will be subject to a 4% monthly penalty from next month.
• Penalty of maximum 300 percent a calendar month after the payment deadline.

Calculation of turnover for the purpose of VAT registration in UAE

In the United Arab Emirates, the turnover threshold for VAT registration is DH 375,000 or more in the event of mandatory registration and DH 187,500 or more but not more than DH 375,000 in the case of voluntary registration.

The following are the supplies that should be addressed while crossing the threshold:

• VAT is payable at the basic rate of 5% on supplies made to consumers.
• Supplies to clients for whom the VAT rate is nil.
• Goods that have been imported
• Services for reverse charging

It’s worth noting that supplies that aren’t subject to VAT aren’t included in the computation of turnover for VAT purposes.

FAQ’s

What is the deadline for VAT Registration Services in Dubai?

As the UAE government established VAT registration services in Dubai, firms from all sectors, jurisdictions have been welcomed to apply. An individual can register for VAT registration at any time during the year, subject to FTA’s acceptance of category-by-category applications. However, before continuing with the application procedure, one must have all of the necessary qualifications.

What are the few factors to take into account while supplying bank data for VAT registration purposes in UAE?

When a corporation registers for VAT as a stand-alone entity, it can supply information about one of its bank accounts in the United Arab Emirates.

The entity must submit information such as the bank’s name, branch’s name, account title, and so on.

If two or more entities seek to register for VAT as a group, the information of one of the two entities’ single bank accounts (ideally a joint account) would serve.

VAT Registration Services for Foreign Investors in Dubai

When foreign investors are conducting business operations in UAE, they must register for VAT.  Upon successful registration, users will acquire a Tax Registration Number, much like other firms.

Why The Infinite services for VAT Registration in UAE?

Since its inception, infinite services has been a major business consultant, providing accounting and tax services to commercial businesses on a global basis. Our VAT experts will assist your business with VAT registration in the UAE procedure and structure it in the most cost-effective way.

Frequently Asked Questions – VAT Registration

1. Is it necessary to submit the VAT registration application in Arabic or can English be used instead?

Even though the application for VAT registration is completed in English, the applicant must give information in Arabic in three columns of the application form. The following is a list of the Arabic information that must be provided:

• Name of the business
• Name of the manager
• Name of the authorized signatory

2. Is it necessary for an individual to pay VAT on imported goods in UAE?

Products and services, including imported goods and services, are subject to VAT.

3. What are the implications of registering VAT for businesses in UAE?

Businesses in the UAE can use VAT registration to recover back input tax on business expenditures and purchases. If your company isn’t registered for VAT, you’ll be losing all of your input tax charges.

4. What conditions are required to register for VAT in the United Arab Emirates?

If taxable supplies and imports surpass the statutory registration level of AED 375,000 in the previous 12 months, a firm must register for VAT.

5. Who is a taxable individual?

A taxable person is an individual who engages in business activities and has a revenue of more than AED 375,000.

6. What is meant by the VAT Reverse Charge Mechanism?

In the United Arab Emirates, the reverse charge system for VAT is used on imported products and services. The supplier is exempt from paying vat; however, the beneficiary is liable for paying vat, which he can reclaim through input vat returns.

7. Is there any tax grouping in the United Arab Emirates?

By registering as a VAT tax group in the UAE, businesses will be able to meet the criteria of the taxation legislation. A tax group would be advantageous for some firms since it streamlines the VAT accounting procedure in the UAE.

8. When is it suitable to use customer VAT number in UAE?

To invoice without VAT, a provider of goods and services to a receiver in another GCC nation will need to have a customer VAT number.

9. What is the exempt from VAT in the UAE?

   • Residential Properties
   • Bare land
   • Passenger transport in the local area
   • Financial services such as life insurance that aren’t offered at a discounted rate or for any other reason.

10. Is it possible for a UAE national to claim VAT?

Nationals of the United Arab Emirates (UAE) are eligible for a VAT refund on the building of a new house for personal use.