The complexities of the VAT often catch out most businesses. The term is so broad and dense that several entities overlook necessary items. A company should have a robust and tax-compliant structure to avoid legal issues. One aspect that most businesses miss out on is VAT liability reduction. Without expert advice, VAT liabilities can be a burden for businesses. The best VAT consultancy in Dubai can assist you in reducing VAT liabilities through several steps. Some of these points are discussed in this article. Read to the end to have an idea of how to minimize these liabilities.
Effective ways to cut VAT liabilities:
Every business long for ways and strategies to reduce tax liabilities. The VAT experts often provide the most effective practices and techniques. These experts’ services enable you to take advantage of the tax breaks and ensure a minimized tax burden. Some of these ways are explained in detail here.
1. Claim a tax relief on allowable expenses:
Claiming tax relief on expenses can reduce the tax amount up to a great extent. Remember that this option is only for permissible costs. This category also includes compensation for any personal expenses incurred during business activity. Examples of such costs could be accommodation, subscription charges or any other charges that you paid for. It also incorporates insurance policies and expenses for childcare.
2. Apply for a Flat Rate VAT:
Large businesses often feel exhausted by paying VAT on a huge sum of annual turnover. Smart accountants and consultants can help a business register on flat VAT rates. After the process, the business will have to pay only a percentage of the total turnover. Unlike the standard VAT accounting, Flat VAT rates require an entity to pay VAT on some turnover percentage. The scheme can save businesses a huge amount.
3. Claim R&D tax relief:
Government authorities often issue tax relief to corporations on research and development processes. The process may include making software, innovating creative ways etc. is your company paying for such endeavors? If yes, you are eligible to claim the tax relief. The internally hire accounts and VAT specialists guide companies on such matters. However, you can also opt for the services of specialized consultants for a better approach.
4. Patent Box tax relief:
If a business is generating revenue from a patented activity, it can claim lower tax rates. The scheme was offered with the sole intention of promoting research and development in the economy. Companies involved in such activities can claim a reduced rate of 10% tax on income from these activities. Such actions can greatly help the business reduce VAT liabilities.
5. Allowance on property building:
Companies can claim tax relief of up to 2% on building properties. The expenditure of a newly constructed commercial building can be taxed at a lower rate. The scheme was introduced in 2018, where the tax rate was 2%. However, the rate is now 3% from April 2020 onwards. Companies can claim this tax if they are involved in building new properties. The services of the best VAT consultancy in Dubai can help a company claims this tax relief.
6. Pension relief:
One of the ways to reduce VAT liability is to claim pension payment relief. Companies pay pension funds to directors and employees, making them eligible to claim the relief. A key takeaway here is that the payments should be made before the end of the accounting cycle. Doing so can make the business claim relief.
7. Relief for creative businesses:
There are certain tax reliefs available for creative industries. These are a kind of generous tax reliefs, just like the R&D for SMEs. Such companies can benefit from reduced tax rates than the statutory rates. Video games businesses often claim such reliefs, termed as Video Game Relief (VGR).
8. Share Schemes relief:
Another way where businesses can reduce VAT liability is to claim reliefs on share schemes. The companies often offer share schemes to their employees. Like the creative business and R&D reliefs, the share scheme intends to promote companies’ reward culture. Since there are numerous offers available, businesses should consult professional experts to claim the right one.
9. Loss relief:
Companies must claim reliefs for losses during an accounting period. Doing so can reduce the VAT liability up to some extent. To claim a tax refund, companies often carry the loss back to the previous period. There are numerous ways to do so. Only the expert consultants can guide you properly.
Why hire a professional VAT consultant?
The services of tax professionals can help a business comply with all the tax rules and regulations. Their assistance is required in various situations to avoid any legal issues related to tax. Having a professional VAT consultant on board can ensure the smooth operations of your business.