Accounting and VAT registration

Accounting Practices in the UAE: A Fundamental Component of Business Operations

In the United Arab Emirates, accounting practices play a crucial role in the success and sustainability of businesses. Here are some key insights specific to accounting in the UAE:

Regulatory Adherence

The UAE has well-defined accounting standards and regulations set by governing bodies like the Securities & Commodities Authority (SCA) and the Central Bank of the UAE. Adhering to these standards is mandatory for businesses, ensuring transparency and reliability in financial reporting.

Global Standards Adoption

The UAE follows International Financial Reporting Standards (IFRS), aligning its accounting practices with globally recognized standards. This adherence to international standards enhances the credibility of financial reporting for companies operating locally and internationally.

Taxation and Financial Compliance

While the UAE generally does not impose corporate income tax, businesses must comply with Value Added Tax (VAT) regulations introduced in 2018. Understanding and navigating these tax regulations form an integral part of accounting practices for businesses in the UAE.

Importance of Professional Expertise

Given the nuances of local regulations and international standards, engaging professional accounting services equipped with knowledge of local laws and global practices is crucial for businesses aiming for accuracy and compliance.

Criteria for registering for VAT

Businesses must register VAT in the following two cases:

If the taxable supplies and imports of a UAE-based business exceed AED
375,000 per annum

If a non-UAE-based business makes taxable supplies in the UAE, regardless of their value, and there is no other person obligated to pay the due tax on these supplies in the UAE.000 per annum

Meanwhile, VAT is optional for businesses whose supplies and imports exceed AED 187,500 per annum.

A business house pays the government, the tax it collects from its customers. At the same time, it receives a refund from the government on tax that it has paid to its suppliers.

Foreign businesses may also recover the VAT they incur when visiting the UAE.

VAT-registered businesses generally

Must charge VAT on taxable goods or services they supply

May reclaim any VAT they have paid on business-related goods or services

Keep a range of business records which will allow the government to check that they have got things right.

VAT-registered businesses must report the amount of VAT they have charged and the amount of VAT they have paid to the government regularly. It will be a formal submission and reporting will be done online.

If they have charged more VAT than they have paid, they must pay the difference to the government. If they have paid more VAT than they have charged, they can reclaim the difference.