Businesses in the UAE need to register for VAT. The VAT registration process there is easy to understand and carry out. While it sounds like a burden to pay VAT for all your purchases and work operations, there are numerous benefits that VAT offers for your business.
If the thought of VAT payments is scaring you out, you need to look into those benefits it offers for your business. There’s also the possibility of VAT claims and repayments. Apparently, it is you who are bearing the brunt, but your customers are the ones paying for it if you look closely. You get VAT repayments for most of your business-related expenses. But there are exceptions.
This article aims to shed light on the business expenses for which you do not get VAT repayment from the government.
Three business expenses exempt from VAT in the UAE
Business expenses are very many. Under the VAT regulations, for most of the expenses, you need to pay VAT. When you pay VAT for those, you need to establish a facilitating framework for it in your organization. For this, you need the services of the Best VAT consultancy around you.
For making the distinction of liability and exemption as well, you will need the help of a professional VAT consultant. The categories of exempted expenses of your business are as follows:
1. Entertainment expenses
If you have your business registered for VAT, you are not allowed to recover the VAT payments for purchases related to the entertainment activities meant for people who are not your employees. You may arrange activities for the entertainment of your customers, prospective clients, investors, and shareholders.
You may want to provide your stakeholders with accommodation, food, and drinks at any event or meeting. These expenses are the responsibility of your company to bear, as these are meant for providing pleasure and entertainment.
2. Employee related expenses
While businesses get to recover most of the costs under VAT regulations in the UAE, there are certain expenses related to employees, which are an exception. When your company for some goods or services which your employee will use for personal benefit and won't pay for it, you can not claim repayment for it.
If you, as an employer was under a legal obligation to provide the services or goods which provide personal benefit, then the employer will need to provide the benefit in order to fulfill the responsibility. In such a case, you will be able to claim VAT repayment for employee-related expenses.
3. Vehicle of personal usage
In the UAE, anyone who has registered for VAT can typically recover the tax incurred on the purchase, rental, or lease of a motor vehicle, provided that the person uses the vehicle for business purposes.
But if the subjects begin to use a motor vehicle for personal needs, he/she no more deserves the right to recover the VAT. The vehicles for which this rule applies include all kinds of road vehicles which can transport and conveyance no more than ten persons at a time. Therefore, it doesn’t include trucks, hoists, or forklifts. Incidental private use doesn’t cause any problem.
For motor vehicles, there are more conditions that decide they will be considered under the private use rule. These conditions are:
- Whether the car is licensed as a taxi
- Whether the car is registered as an emergency vehicle
- A vehicle that is used in the vehicle rental business
Looking forward to dealing with VAT payments efficiently?
You have to pay VAT to the government. But the purchases that you make on behalf of your business are yours to claim. The government of the UAE pays those back to you. While for most of the purchases, this is true. For some, you might not get repaid. Those include entertainment expenses, personal use transport, and benefits to the employee that your company may offer.
Dealing with all of this can tricky. Tackling the technicalities of the VAT process and complying with the regulations in general warrants you to seek a professional’s help. You can get in touch with the Best VAT consultancy in Dubai to ensure a risk-free VAT registration, payment, and return.
When you comply with regulation with the help of experienced professionals, you will be able to reap the maximum benefits out of the VAT regulations. You will also be able to handle all the dealings without falling into the threat of penalties, which you must fear if you don’t seek VAT consultants.
There’s no denying that the VAT process and its conditions are complex in the UAE. But there are benefits too. When you comply with the regulations, your business systems and workflow processes see a significant level of improvement as well. The records and flow of important information get rid of any inaccuracies and misrepresentations.
Being better informed never hurts, and when it comes to regulations like VAT in the UAE, the opposite may hurt your business.