Every freelancer or solopreneur needs a strategic plan for attaining their financial objectives, including accurate record keeping, increasing profitability and maintaining tax compliance. Regardless of the size of your start-up you too can benefit from employing an accounting firm that helps organize finances. If you want to increase the chances of success of your work in the future, then you must make sure that you build the foundation with strong bookkeeping and accounting support.
Are you a freelancer serving in UAE?
When you’re a solopreneur or a freelancer, you’re a one-man show. In addition to delivering quality service, you’re also responsible for not so thrilling business operations for example accounting. However, you should not wait for tax reasons to practice systematic bookkeeping.
Typically, bookkeeping comprises of a variety of services to ensure that all financial transactions are recorded. These services can include sales, invoices, purchases, payroll, payments, earnings, and more.
If you are a freelancer in UAE and would like to save yourself the pain of last-minute accounting errors that can adversely affect your business you must know the challenges and ways to overcome them beforehand.
UAE Taxation & Freelancers
With changes to UAE taxation laws pertaining to freelancers and solo entrepreneurs, gaining the assistance and expertise of an accounting firm may be more pertinent than ever before!
Freelancers who generate revenue of over Dh375,000 a year are obligated to register for VAT. For those generating revenue of between Dh187,500 and Dh375,000, VAT registration is optional and those earning less than Dh187,500 cannot register under current rules.
Some freelancers and solo entrepreneurs may prefer to avoid the hassle and responsibility that goes along with VAT registrations, such as completing quarterly returns and paying VAT amounts on time. There is however a compelling reason to do so – there is a growing trend of UAE companies favoring freelancers who are VAT registered over those that aren’t, with some companies choosing not to work with unregistered freelancers at all.
Risks of Overlooking Book-keeping
This may seem like a bitter pill to swallow for lower-income freelancers, however employing a solopreneur that is under-reporting their income puts the employing company at risk of colluding with freelancers evading their tax obligations.
Under UAE VAT laws, every taxable entity needs to keep complete and accurate records of all goods and services supplied, imported or exported. All purchases, credit notes, adjustments as well as taxation payable and recoverable need to be documented and these records need to be kept for five years.
Failure to keep or maintain proper tax records can result in hefty fines – AED 10,000 for the first offense and AED 50,000 for each successive instance. This is a scenario that most business owners would prefer to avoid.
If you want to create a successful business in the future, then the financial tracking and planning is a critical part of your long-term success. Failing to keep up with the numbers is one of the biggest mistakes that you can make as a freelancer. Common mistakes are delaying book-keeping every month, skipping tax payments, ignoring cash flow issues, manual calculations that are prone to human errors, hiring an inexperienced accountant to handle your finances and many many more.
Benefits of employing a bookkeeping firm for your freelancing business
Now like any other problem bookkeeping hassles for freelancers has many ways around it! Co-founder & accounting expert at Xcel Accounting, Rajeev Samtani has encountered a trend that could present a way around these difficulties for freelancers – those earning under Dh187,500 can team up with other freelancers so that their combined revenues meet the minimum threshold requirement.
“Freelancers can form a collective and register under a single license so that their revenues are collectively considered for VAT registration purposes. They each still maintain their individual profit centers within the business. Alternatively, freelancers may be limited to working for companies that do not require their contractors to be VAT registered,” says Mr. Samtani.
Ultimately, enlisting the services of an accounting firm in Dubai to handle the paperwork that goes along with VAT registration will have many additional benefits. Research from small business surveys indicates that 89% of small businesses are more successful with the help of an accountant or financial advisor and that this is the key to their growth.
A Certified Public Accountant provides additional value by being a source of expert financial advice that ensures the client’s business remains profitable, liquid and solvent. An accounting or audit firm can also assist freelancers to set up processes and procedures that will automate the capture of financial and non-financial information that will ensure compliance with record-keeping requirements. This sets a momentum for your workflow that eases unnecessary stress.
Be prepared to give away your taxation worries
Employing a qualified accounting firm in the UAE can assist in avoiding these pitfalls and keep your business on the right track to profitability and compliance.
Xcel Accounting is a Dubai based accounting firm providing high-quality financial services, enabling its clients to gain a clear strategic and competitive advantage, whilst also adhering to professional business ethics. A range of expert services in the fields of accounting, auditing, and management consultancy can help take your business to the next level of wealth management. We offer comprehensive accounting, advisory, and consultancy services tailored to serve freelancing financial needs and can bring financial expertise to your business.
Our mission is to take care of your business’s financial details so that you can expand and experience massive growth in years to come.
Call us today to learn more about the services that we can provide for your company.