Whether you sell goods or services, VAT registration is a legal requirement for all businesses. The process can be voluntary or compulsory, depending on the amount of turnover generated by your business. There are benefits and drawbacks to each. Read on to learn more about VAT registration and what it entails. Find here the list of reliable institutions for VAT diplomas in UAE.
Benefits of being VAT-registered:
When it comes to running a business, being VAT registered has a lot of benefits. One is that you can reclaim the VAT you have paid on the goods or services you sell. This will help your business save money on taxes and increase your cash flow. You can also use your VAT number as a marketing tool by including it on your invoices or website. This will help your company look more professional to potential customers.
Another benefit of being VAT registered is that it can help your business grow. Many businesses prefer to work with a registered business over a non-registered one. Having VAT registration will help these companies know that you’re serious about doing business and that your VAT invoices are legitimate.
Penalties for failing to do so:
Penalties for failing to register for VAT can be steep. Penalties are based on the amount of VAT you owe and the length of time you were late registering. However, HMRC has several ways to reduce or even eliminate penalties. Here are some of them.
The first way to reduce penalties is to register as soon as possible. Failure to register can result in a penalty of AED 50,000. Sometimes, a penalty of 50% of the VAT due will also be imposed.
Voluntary registration is an option that a company can opt for. However, it is important to note that there are certain restrictions on this type of registration. For instance, an applicant is not allowed to choose the registration date. In addition, the applicant must provide certain supporting documents. In addition, voluntary registration may be subject to future changes.
Several studies have shown that voluntary registration is associated with lower business activity and tax burden. Firms can register only voluntarily if they are not subject to compulsory registration. Hence, voluntary registration is non-binding.