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VAT Obligations for Freelancers

Sept 30,2020 / Haroon Juma /VAT Registration Blogs

 

Operating as a freelancer in the UAE has become much easier during the last few years. The UAE has introduced several initiatives to allow individuals to commercially operate with a range of business license options that reduce the cost of operating. Freelance licenses are the preferred option for many who have specialist skills and wish to operate freely and work for many companies or projects.

With respect to the VAT Legislation, there are several misconceptions that could negatively affect you if you operate a Freelance business license. In this blog, we discuss what you must be aware of from the UAE VAT Laws.

 

Who needs to Register?

The UAE Legislation mandates “Every Person” exceeding the 375,000AED threshold for taxable supplies in the previous 11 months and next 30 days must register within thirty (30) days. Voluntary registration can be made once turnover is at least reaches a threshold of 187,500AED.

It is clear that most of the applicants for UAE VAT registrations are companies with trade licenses, which leaves the independent contractors or the freelancers to question if they need to register for VAT or not.

 

How Are Freelancers Affected?

The number of freelance licenses in the UAE is growing steadily and the UAE government acknowledges and allows freelancing so long as you have the necessary licence prior to operate.

If you are a freelancer or planning to work independently, it is imperative to know what is required of you.

You might not be aware, but Freelancers are required to register for VAT and follow the VAT rules if your operation is generating any economic consideration (paid in monetary terms or in kind).

 

Advantages of VAT registered for Freelancers

With the tougher market conditions, you must ensure credibility to give an edge in your market.

Getting registered for VAT is one of the ways to build your credibility.  It is notable that a VAT Registered freelancer creates a positive market impression by promoting.

  • Stability

An entity can only register for VAT if it reaches a threshold of 375,000AED or at least 187,500AED. This means you are financially stable and can deliver the work without any delay due to lack of funds.

  • Legitimacy

One of the draw backs of hiring a freelancer is the legitimacy of relationship, which may leave a client to hire licensed company instead. A freelancer with VAT registration, in addition to other licenses required by the government, provides access to larger companies.

 

  • Compliant to the law

As a VAT registered Freelancer means you are abiding by the law, which gives your client an impression that you are trustworthy and will remain a sustainable partner.

 

Failure to Register

If you reached the mandatory threshold and fail to register for VAT, you will be subject to administrative penalties. Failure or late registration will be subjected to a 20,000AED penalty.

To avoid future issues with the Federal Tax Authority, it is advisable to keep track of your transactions and financial records, register for VAT and be complaint with UAE VAT rules.

 

What’s next?

SimplySolved is experienced in helping Companies and Freelancers to ensure their compliance with the UAE VAT rules. To know more about VAT registration for FREELANCERS, please call us at 043445338 or email us at info@simplysolved.ae

 

 

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We support our clients with defined processes, platforms and expertise to deliver advisory, project and outsourced services in Accounting, Tax, Auditing, HRM, IT & Marketing. Our offerings are specially designed to meet the UAE Regulations to put you in control of your information, comply to the regulations and help you make better business decisions.

 

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