Freelancing is a highly beneficial profession because it allows you to earn without taking up formal employment. Before 2018, freelance DJs in the UAE would enjoy untaxed income for all their gigs, making it a very lucrative and popular category choice among freelancing niches. However, after the Federal Tax Authority’s new rules and regulations on 1st January 2018, the financial surroundings for freelancers took a different direction. With the new tax guidelines, freelancers in the UAE are now liable for a revenue-based VAT charge.
Being a freelance DJ in Dubai today can be tough. Aside from reserving, promoting, and staging your shows, taxes, and bookkeeping tasks are more involving for the self-employed individuals than those working 9-5 jobs. With no accounting experience, record-keeping seems overwhelming for plenty of freelancers. Once you have proper financial management, keeping account records for your freelance business isn’t that difficult.
2 Most Important Items Freelance DJs in Dubai Must Track
Proper financial management helps freelancers in numerous ways, including using the records to make month-to-month comparisons and tracking general business progress. Here are the two essential items to consider:
1. Your Total Income
Tracking your income is a legal requirement, depending on whether you are eligible for VAT. Freelancers with annual revenue of at least AED 187,000 upwards should consider registering for VAT. Moreover, keeping accurate income records will give you a real picture of your yearly performance and see whether you are accomplishing your goals as a DJ.
How To Track Your Income
For precise accounting, you will want to set up a different bank account for all your deejaying income. Let all your payments go into the business account. In addition to capturing exact revenue details, you can link up the payment account to bookkeeping programs such as; Wave, Xero, Quickbooks, and Freshbooks, among others. The software apps are useful for categorizing and tracking your freelancing salary.
Remember to save all your invoices, contracts, and emails concerning your income.
2. All Your Expenditure
You should be recording all DJing related expenses. Remember to add a note of how the money was used in your business, and list all the costs. Make sure you keep all expenditure receipts, which will come in handy when filing for tax. For instance, you need to track some of the most common expenses like DJ equipment, running adverts, and purchasing the latest music to play in shows.
How To Track Your Expenses
As is the case with income, you will need a business account to issue payments. Depending on your needs, you can open a separate operations account, or use the existing business account as the income account.
Saving proof of your expenses is equally important. Purchase receipts or canceled checks can both work. All canceled checks should go along with a copy of the bill verifying it was a business expense.
FREE Tools to Track Your Income and Expenses
Due to the tough economic times, you cannot overlook the importance of financial planning in your freelance career. You will want to make sure that your earnings are directed to the best cause, which means creating a suitable expenditure plan. There are plenty of apps to help you track your spending, including:
Mint: You wouldn’t list expense tracker apps without mentioning Mint, one of the most excellent personal finance tools. Aside from supporting a wide selection of financial institutions, the free app helps to monitor your budget, track your expenses, on top of credit and bills monitoring.
Wally: If you are looking for an all-inclusive expense tracker app to shed light on your spending habits, Wally could be the right program. The app uses artificial intelligence and other latest technologies to track your expenses. In addition to providing useful feedback on your spending, the app carries a social feature to help you track shared expenses.
QuickBooks: If you are having issues with messy financial reports and unclear results in your small business, QuickBooks can help to set the records straight, both in your personal and business financial life. The app is available in various editions based on your business needs and platform. You can easily bundle up business financial management through contract management, tracking payroll, and expense tracking in one useful app.
YNAB: You Need A Budget is an app that will specifically assist in tracking your budget and expenditure. With the app, you will have to assign every penny you earn to a specific job ranging from expenses, investments, to savings, which the software uses to display your budgets.
Clarity Money: The financial management app is available online and comes with a mobile interface. The program stands out for supporting wide-ranging accounts and being easy to navigate. A built-in card like app helps to analyze recent account activities such as savings, subscriptions, and spending.
VAT Compliance Requirements for Freelance DJs in Dubai
Paying taxes is one of the legal requirements for freelancing in Dubai. Without complying with the tax requirements in the United Arab Emirates, you could run into legal issues with the Federal Tax Agency. Here is how freelancers in the UAE-based Dubai, can register for VAT:
Phases of VAT Registration
VAT registration in Dubai is a five-phased process as follows:
1. Checking Eligibility
The government split freelancers into three income-based categories, for eligibility criteria.
- Compulsory VAT registration for freelancers making more than AED 375,000 in revenue
- Optional VAT registration for freelancers earning between AED 187,000 to AED 375,000 in revenue
- No VAT registration for freelancers making less than AED 187,000 in revenue
The FTA includes all exports, imports, taxable plus reverse charge supplies when calculating your income tax. If you qualify for taxation, then you should proceed to the next steps.
Source: Tally Solutions
2. Secure Your Freelancer License
Unlicensed freelancers cannot register for VAT. Getting a license typically requires an employer’s permission, which you will use in the application process. Since freelancers have no definite employer, consider applying through one of the free-zone authorities that provide freelance permits or licenses, though at a fee.
As a geographical area that allows individuals and foreign workers to set up businesses, each free-zone has distinct registration requirements, including charges. Below is a summary of different freelancer fee structures with some of the free-zone authorities.
Freelance License Fees in UAE’s Free-zones. Source: Jax Auditors
3. Register Online
The VAT registration process for freelancers is online-based. Once you secure a license from the free-zone, visit the Federal Tax Authority’s website to register a new account. Log in to the account to complete the registration process for value-added tax. You will need some documents for successful online VAT registration, including:
- A copy of your government-issued ID
- A description of your freelance business activity
- Bank details
- Incorporation certificate for a freelance company
- Projected Future revenues
- The Article of Association or the Memorandum of Association
- Trade license
- Your passport photo
- Your previous year’s income details
After submitting these documents, freelancers will receive their Tax Registration Number upon approval of the application.
4. Maintaining Financial Records
Maintaining proper financial records is a vital requirement, whether or not you are eligible for VAT. While you may not be liable for freelancer tax, some of your customers may. The clients will be asking for invoices and other financial details, which you must be ready to provide.
Freelancers must adhere to some guidelines under VAT compliance, including:
- Drafting all invoices with their Tax Registration Number or TRN
- Numbering all invoices in sequence
- Separately, disclosing added tax and the total cost
The figure below shows what to remember for VAT Compliance
Source: Tally Solutions
5. Filing VAT Returns on Time
The Federal Tax Authority requires freelancers to file quarterly returns. In addition to accurately labeling your returns to avoid incurring heavy penalties, you need to calculate the total input and output tax. The difference between the Total Output and Total Input taxes is what goes to the government.
Maintaining proper financial records is an integral part of your professional freelance career. The files will help you assess the progress of your deejaying business on a monthly and yearly basis. If you track both your income and expense accounts diligently, things should be easy come tax time. Having in-depth records will make sure you are accurate, along with making the most of your deductions. Hopefully, you can save some money as a freelance disc jockey.
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