VAT registration in UAE

A GUIDE TO VAT REGISTRATIONS IN UAE

The UAE implemented Value Added Tax (VAT) on January 1st, 2018. Each stage of the supply chain is subject to the transaction-based indirect tax referred to as VAT. Since customers endure VAT, it is a consumption tax. By VAT registration as per UAE VAT law, the government has acknowledged your company.

The income generated by your firm will determine whether or not you really ought to register your business entity for VAT in the UAE. Most goods and services are subject to the 5% general VAT rate. However, some are entitled to a 0% rate or a VAT exemption (subject to specific conditions being met). 

VAT burdens are not undertaken by businesses. The VAT liability amount that taxable individuals paid to other taxable individuals on business activity purchases can be abstracted fractionally through a system of deductions.

A new revenue stream from VAT will be made available to the UAE, which will be used to fund the provision of top-notch public services. Additionally, it will assist the government in realizing its goal of lessening reliance on oil and other hydrocarbons as a revenue source.

WHAT IS THE IMPORTANCE OF VAT:

According to experts, the UAE's economy and business owners will be benefited long-term from the implementation of VAT. The following are some of the key factors that make VAT registration in Dubai important:

• It improves brand equity
• expands market opportunities
• saves needless fines
• enables claiming VAT refunds

WHAT IS THE VAT REGISTRATION PROCESS IN UAE?

The VAT registration process in the UAE can be completed online using the VAT registration portal found on the www.tax.gov.ae website.

Once the application is filed, the FTA will examine the details and supporting documentation and, if everything complies with the requirements, approve the application, granting a Tax Registration Number (TRN).

STEPS INCLUDE:

1. Sign-up for an e-Services account through the FTA’s website and activate it.
2. Access the e-Services account dashboard.
3. Click on “Add New Taxable Person”.
4. Click on “Register for VAT”.
5. Complete the registration process.

The Ministry of Finance will issue a VAT certificate upon the completion of the VAT registration process. This certificate serves as an official declaration from the relevant authorities that the company has been registered in accordance with UAE VAT Law.

WHAT ARE THE DIFFERENT TYPES OF VAT REGISTRATIONS IN THE UAE?

• MANDATORY REGISTRATION:

Here, the businesses, whose taxable supplies and imports exceed AED 375,000 per annum are obliged to register themselves for VAT. Though this threshold is not applicable to foreign business.

In simpler words, if the type of business is resident, then as soon as the business’s taxable supplies and imports exceed AED 375000 per annum, i.e., the threshold limit they become liable to get the business registered under VAT.

Whereas, if the business type is nonresident then no threshold limit is applicable. It is mandatory for them to register themselves under the VAT.

• VOLUNTARY REGISTRATION:

Here, it is optional for businesses whose supplies and imports exceed AED 187,500 per annum to register themselves for VAT.

WHAT DOES THE CHECKLIST OF REQUIRED DOCUMENTS FOR VAT REGISTRATION CONSIST OF?

• Company Contact Details (P.O Box and complete address such as building & area)
• Memorandum of Association (not mandatory for sole establishments)
• Personal Contact Details (Mobile Number, Designation, Email Address)
• Details of company’s Bank account [(Must be company’s bank account – Individual’s bank account will not be accepted) – (Account Name, Account Number, IBAN, Bank Name, Branch Name)]
• Report on the company’s activities
• Turnover for the last year in AED & Letter (Signed and stamped by the owner of the company and must be printed on the company’s letterhead)
• Supporting sales documents for 12 months
• Expected turnover in the next 30 days
• The estimated value of imports for one year from all GCC countries
• The estimated value of exports for one year to all GCC countries
• Consent from you if you deal with GCC suppliers or customers
• Supporting documents for customs registration in the Emirates (If Eligible)
• Expected revenue & expense for the next 30-days after getting TRN
• Passport copy or Emirates ID to prove the identity of the person in authority the owner/manager who owns the trade license (should not be expired)
• Trade license copy of the company
• Certificate of incorporation of the company (if available)
• Certificate of Power of Attorney of the business

WHAT IS THE PENALTY FOR VAT NON-REGISTRATION IN UAE?

Any business that does not complete the VAT registration process by the Federal Tax Authority's deadline or that does not submit registration after exceeding the discretionary threshold limit is subject to a penalty of AED 20,000.

WHAT ARE THE VAT REGISTRATION EXEMPTIONS IN UAE?

Businesses are not authorized to register under UAE VAT if the value of their supplies to member states is below the voluntary registration level of AED 187,500. Additionally, companies that only produce zero-rated supplies are eligible and may request VAT registration exemptions.

WHAT ARE THE ADVANTAGES OF VAT?

• Since VAT is a consumption tax, the amount of revenue will always be the same, and hence simpler to administer than other indirect taxes.
• VAT generates a significant quantity of revenue at a low tax rate and can raise in modest installments, so consumers bear the least amount of burden.
• It reduces avoidance due to the catch-up effect of VAT.
• Since VAT is a neutral tax, it may be imposed on all sorts of businesses.

WHAT ARE THE DISADVANTAGES OF VAT?

• Due to the VAT's entire billing system foundation, its installation is costly.
• Value-added calculations must be made at each level, which is not an easy task. VAT is therefore challenging to comprehend.
• It is necessary to keep track of all purchases and transactions, which will raise the cost of compliance.
• Consumers must be aware of VAT to implement successfully; otherwise, tax omissions will result in numerous fraudulent invoices.
• VAT has a regressive effect. Because they spend a larger percentage of their income, the poor will be more affected than the wealthy.

Conclusion

In short, the implementation of VAT will bring long-term advantages to the UAE's economy and business owners. The income produced by your company will help you determine if you need to register for VAT in the UAE or not.

We assist you with VAT registration services across the Emirates. Our team of tax experts at BRS offers the best VAT consulting services in Dubai, UAE.