5 Easy Steps of VAT registration for Freelancers in Dubai

Through freelancing, people can earn without having to join an organization. As a result, freelancing has become one of the people’s favorite choice in Dubai. Initially, freelancers in the city enjoyed exemptions from all tax obligations. In 2018 however, the UAE and Saudi Arabia ended tax-free living.  New VAT rules and regulations were introduced. The jurisdictions require freelancers to register and regularly file returns for VAT.

The law is clear on the heavy penalties that freelancers risk for tax errors, discrepancies, and evasion attempts. In addition to avoiding the penalties, registering for VAT  results in increased trust between the individual freelancer and clients. Clients will easily trust and be more willing to work with a VAT compliant freelancer. 

Most freelancers in the UAE are yet to register for the system. This is due to the widespread perception that the process involved is daunting and complicated. However, this is far from the truth. The method of registering and navigating through VAT involves only five easily doable steps. They include:

1. Confirming liability to register for VAT

The government has split freelancers into three brackets based on revenue generation for VAT purposes. VAT registration is compulsory for those that generate Dh 375, 000 annually. To those that earn between Dh 375, 000 and Dh 187, 000, registration is optional. Finally, under the new rules, those that earn less than Dh 187, 500 per year are not eligible to register for VAT. To register for VAT, therefore, a freelancer must have generated more than Dh 187,500 in the last twelve months. 

2. Obtaining a license 

A freelancer in Dubai must have a freelancer license to register for VAT. Acquiring a license requires permission from the employer. One can then get a license from a preferred free zone at a cost. The cost that is charged for acquiring a license from the various free zones are as shown below:

Free Zone

Cost of License (in AED)

RAK Free Zone

15,000

Fujairah Free Zone

14,000

UAG Free Zone

13,000

Ajman Free Zone

11,000

D-Tech Free Zone

7,500

Twofour54 Free Zone

2,500


3. Online Registration 

After acquiring a license, the freelancer needs to create an account at the Federal Tax Authority Portal. Following account creation, the freelancer can then proceed with VAT registration. The certificates that are required in the registration process include;

  • Trade License
  • Description of Business Activity
  • Certificate of Incorporation
  • Bank Account Details
  • Revenue details for the last one year
  • Freelancer passport or Emirates ID
  • The Memorandum of Association
  • Projected revenues for the next five years

Note: For some businesses, the needed documentation also includes custom details and agreement of the sponsor

4. Maintenance of financial records 

All freelancers in the United Arab Emirates, irrespective of whether they are eligible for VAT registered or not, should always maintain their financial records. Information and records of all income received all through the year with clear indications of the senders and the services offered should be well kept. Clients will, from time to time, require freelancers to draft invoices. It is, therefore, essential to record all financial transactions and activities. It is as well vital to ensure that the records are accurate.

Apart from using the information in VAT registration and disbursing it when needed by the client, maintaining financial records also helps in better organization. Bookkeeping thus helps freelancers to track all important commercial activities.

Freelancers have the option of either outsourcing the accounting work to experts or doing it by themselves. Small freelancers are encouraged to maintain the records by themselves, mainly because their records are less complicated. Freelancers with vast financial records, on the other hand, are advised to either outsource the task of financial bookkeeping to professionals or to make use of bookkeeping software such as Tally, QuickBooks, and Xero.

5. Filing VAT returns on time

The law requires a freelancer to file returns every quarter, failure to which heavy penalties are imposed.  On top of making payments on time, freelancers should ensure that the right amount is paid. The amount payable to the government is the difference between the total input tax and the total output tax.

To Sum it Up

Considering the intense competition on the ground, establishing oneself as a freelancer in Dubai can be quite a process. In addition to guaranteeing exemplary services, freelancers also need to convince clients that they are legit. This is particularly because of a large number of scammers posing as freelancers. One way to achieve this is by being among the legal compliant freelancers in the UAE. Our team of freelancers is skilled to offer the best services in the UAE at affordable prices. Visit our website to connect with freelancers all over Dubai.

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