How to Register VAT for Freelancers in UAE? | BestaxCA

How to Register VAT for Freelancers in UAE?

How to Register VAT for Freelancers in UAE?


Do you want to Register VAT for Freelancers in UAE? The UAE regulators have levied new rules and facilities for individuals and corporates for VAT compliance. A number of measures have been taken to ease the working platform for freelancers in the Emirates. It was announced in November 2020 that Abu Dhabi would issue freelancer visas. This visa opens the opportunity for freelancers to manage and legitimate their business accounts in the United Arab Emirates.

That’s why it’s mandatory to VAT Register in UAE after meeting the specified criteria of FTA. In the case of not fulfilling the VAT requirement, a self-employed individual may face serious consequences. That’s why freelancers need to register themselves for VAT compliance in Dubai.

Is a Freelancer Subject to VAT Registration?

The UAE legislation defined a threshold for freelancers which specifies whether they are subject to VAT registration or not. The first step is to analyze the eligibility of VAT for freelancers in UAE. The authorities divide this into three categories according to the taxable revenue generated, which includes all imports, exports and charge supplies:

  • The freelancer is exempted from VAT registration if the taxable supplies are less than 187,000.
  • Voluntary VAT registration is applied to individuals if the taxable supplies are between AED 187,000 to AED 375,000.
  • VAT registration is mandatory if the taxable supplies are higher than AED 375,000 in the last 12 months.

Procedure for VAT Registration UAE

Many taxable freelancers do their business independently and generate handsome incomes, but are stuck on how to register for VAT in UAE? There is a lengthy but simple process for resident and non-resident freelancers. These five steps need to be followed for VAT registration UAE.

Applicable to VAT

The foremost step is to analyze whether a self-employed individual is fulfilling the above-mentioned VAT threshold for registration. If the freelancer meets the criteria for VAT registration, then he will move forward to the next tax compliance.  

Get a Trade license

To be eligible for VAT registration, the freelancer must obtain a trade license in the United Arab Emirates. There are multiple free zones in UAE that provide freelancing licenses at an affordable price. A permit isn’t granted until the employer gives his permission. Basically, the company wants to make sure the freelancer doesn’t compete with the company’s policies. Please also note that an individual may still fall under VAT compliance even if he doesn’t have any trade license and is making taxable supplies e.g earning rental income from commercial properties. 

Freelancer online Registration

The VAT registration process is carried out online. Once the freelancer has obtained the required license or meets the registration criteria, he or she will need to register for VAT at the Federal Tax Authority website. Freelancer needs an official FTA account to start the registration process. After login, it requires some legal documents such as:

  • Passport and a copy of the Emirates ID
  • Incorporation Certificate
  • Trade license
  • Memorandum of Association (MOA) / Articles of Association (AOA)
  • Description of Business and financial Activities
  • Bank account information
  • Sponsorship agreement (if applicable).
  • Past Revenue details (for 12 months)
  • Revenue future projections.

Keep all records & Bookkeeping

A freelancer should take this step, even if he or she is not eligible for VAT registration. The freelancer will be able to utilize it when any authority requires VAT documentation or records in the future.

It might help you to prepare the invoice in a particular manner, sequence, and format. This is also necessary to disclose the total cost and the additional VAT separately. Thus, you will have to maintain your books and keep track of all financial records on a regular basis. 

VAT Return File

VAT filing in UAE is required every quarter or monthly (in case of taxable supplies more than 150M per annum) within the stipulated deadline to save your business from heavy fines and penalties. The freelancer should submit an accurate VAT return file otherwise authorities may take serious actions. He or she necessarily needs to calculate the Total Output Tax (tax you collect from customers) and the Total Input Tax (tax you paid to suppliers and net them). 

Hidden Benefits of VAT Registration for Freelancers:

Freelancers are doing their business independently and generating high profits. To secure this earning they must abide by tax obligations to minimize the risk of penalties. By registering for VAT it gives customers a good impression and it may also enable you to recover VAT paid to suppliers which would otherwise have been a cost if not registered for VAT. The freelancers also have some hidden benefits of VAT registration UAE.

Management of Accounts

The UAE’s government authorities equally focus on enterprises and individuals for VAT compliance to stabilize the economy. VAT-registered freelancers get many advantages such as they can appropriately manage accounts and grow their business. This bookkeeping might ensure their clients about the authentication of services offered. In addition, the VAT registration Service in UAE is helpful when FTA inspects a freelancer account. Thus, VAT compliance proves a secure wall against penalties.

Obtain TRN Number

After getting registered for VAT, the freelancer gets a Tax Registration Number (TRN) which they mention on each invoice. Self-employed individuals must show their VAT invoices with an accurate TRN, serial number, and cost of services. It will secure a freelancer business in the United Arab Emirates. 

Stay out of Administrative Penalties

Not having been registered for VAT may cause some problems for the freelancer in the form of administrative penalties and fines. Therefore, if coming under the registration scope as per VAT Law, it is required to register for VAT in UAE to avoid potential risks.

Get the Complete VAT Compliance in Dubai 

UAE is a secure business hub for individuals and corporations if they comply with legal obligations. In the past few years, many freelancers have remarkably grown their business in Dubai, but do not understand the VAT importance. Dubai tax savings for online freelancers and consultants can be significant if they are well-versed with the VAT laws in the UAE. Multinationals easily handle their tax compliance with professional financial officers, but self-employed individuals fail to comply with these laws. That’s why they faced multiple issues. So, it’s a bit of friendly advice that before you start working in the UAE, you must be well-versed with the VAT laws in the UAE.

The best solution is to take assistance from a tax advisor for complete VAT services in UAE. The Bestax Chartered Accountants and VAT consultants guide freelancers in each step of registration as per FTA standards.