The UAE introduced VAT (Value Added Tax) on January 1, 2018, at a standard rate of 5% on most supplies. The Federal Tax Authority (FTA) was appointed as the regulatory body that oversees and controls taxation in the country, including VAT. To ensure compliance with the VAT laws and operate lawfully in the market, all businesses are required to undergo VAT registration UAE with the FTA.
However, navigating the complexities of the VAT system can be a bit overwhelming for business owners. Therefore, we have compiled a series of information about VAT registration in Dubai, why it matters, who needs to register, and what is the procedure to complete this crucial task.
VAT in the UAE: A brief overview
VAT is basically an indirect tax levied on a product at each stage of the supply chain. It is added to the value of the product, from its production to its final sale. Ever since its institution, it has become a constituent of the UAE’s tax system, affecting both businesses and consumers equally.
Businesses collect VAT for sales from consumers on behalf of the government and later claim a refund for VAT paid on relevant purchases. This ensures that businesses pay tax only on the value they add to the product, thus ensuring a fair system.
Importance of VAT registration UAE
VAT registration in Dubai holds significant importance for businesses. Here’s why –
- Legal compliance: VAT registration encourages businesses to comply with the tax laws in the UAE. If the business passes the registration threshold and fails to register within 30 days, it gets exposed to unwanted penalties. Hence, businesses must ensure to avoid these foreseeable risks and maintain financial prosperity and business reputation.
- Enhanced financial management: VAT registration UAE enables systematic financial record-keeping within businesses. They are required to maintain precise records of all VAT-inclusive transactions including purchases and sales in order to adhere to FTA regulations. This practice not only enables accurate tax reporting but also helps companies manage their cash flow better and ensure transparency.
- Government benefits: By registering for VAT, businesses can benefit from potential tax refunds and various government incentives. This can help reduce their overall tax liability and strengthen their financial strategy.
Eligibility Criteria for VAT Registration UAE
According to the UAE VAT law, all businesses, including local ventures and international corporations, operating within the country are required to register for VAT within 30 days of their taxable supplies and imports crossing the mandatory registration threshold. Companies not meeting this limit have the option of voluntary registration.
Mandatory Registration
When annual taxable supplies and imports of a business exceed AED 375,000 within the past 12 months or are anticipated to surpass this limit in the next 30 days, they must mandatorily register for VAT with the FTA. Failing to complete this process in such circumstances can lead to penalties.
Voluntary Registration
If the total value of the taxable supplies and imports of a business exceeds AED 187,500 but does not exceed AED 375,00, they can opt for voluntary registration. This step can be beneficial for startups and small businesses, allowing them to claim input tax credits on purchases.
VAT exempt supplies
The Federal Decree-Law No. (8) of 2017 categorizes the following supplies as VAT exempted. This means the businesses dealing in these goods or services need not register for VAT or file VAT returns in the UAE.
- Bare land – Supply of bare land, such as undeveloped plots
- Specific financial services – Financial services not provided for an explicit fee, discount, commission, rebate, or a similar consideration
- Local passenger transportation services – Passenger transportation services provided within the UAE, such as buses, taxis, and metros
- Residential properties – Lease and sale of residential buildings
Guide to registering for VAT in the UAE
The process of VAT registration UAE includes the following steps:-
Eligibility check – First and foremost, determine whether your business is eligible for VAT registration in the UAE. This can be determined based on the annual taxable supplies and imports of the business. If it exceeds the threshold of AED 375,000 per year, registration is mandatory. If not, then the business can choose to register voluntarily. Additionally, if the business anticipates exceeding the mandatory threshold within the next 30 days, it is eligible to register for VAT with the FTA.
Document preparation – The specific documentation and details required for VAT registration UAE are as follows:-
- A copy of your company’s trade license
- Emirates ID copies of the business owner(s) and authorized signatory
- Address, contact number, and email of the company
- Business bank account details
- A detailed description of business activities
- Documents showing annual turnover
While arranging the documents for submission, the business owner must ensure that they are valid and accurate to avoid any delays in the process.
FTA account creation – To initiate the registration process, you need to create an account on the Federal Tax Authority (FTA) e-Services portal:-
- Visit the FTA’s online portal.
- Complete the registration form with your company details.
- Receive a verification email from the system.
- Confirm to activate your FTA account.
Registration form completion – Once the FTA account is activated, log in to the e-Services portal.
- Click on “Register for VAT” on the dashboard.
- Enter the requested details such as the business name, trade license number, and Emirates ID details.
- Input a detailed description of the business activities and the expected taxable supplies and imports.
- Attach copies of the required documents.
- Submit accurate figures of the annual turnover and taxable supplies.
Application and payment submission – After completing the form, attach the documents and submit. However, before submission, double-check all entries for accuracy.
Application review – The FTA will review the application and accordingly share the result. If approved, a Tax Registration Number (TRN) and a VAT Certificate will be issued for the business, confirming its VAT registration status.
Documents required for VAT registration UAE:-
- Trade License
- Memorandum of Association (MOA), outlining the company’s structure and the roles and responsibilities of its members.
- Bank Account Details
- Email ID and Contact Details of the business
- The physical address of the office
- Yearly Turnover Report
- Customs Details (If the business is involved in import or export)
- Emirates IDs of all the company partners/owners
- Power of Attorney (If someone else is registering on behalf of the business)
- Other documents, as requested by the FTA
Tips to maintain compliance after VAT registration
Here are some best practices for your business to ensure compliance post-VAT registration in the UAE:
- Charge VAT on all taxable supplies and clearly display it on the invoices.
- Maintain accurate records of your business finances.
- Submit timely VAT returns to the FTA.
- Issue VAT invoices for all taxable supplies and include necessary details like the date of issue, a unique identification number, and the Tax Registration Number (TRN).
- Comply with all FTA regulations including invoice formatting, record keeping, and VAT return submission.
Streamline your VAT obligations with Shuraa Tax!
VAT registration UAE is a crucial step for businesses to ensure compliance with local regulations and avail benefits like input VAT recovery and better credibility. Through a structured approach and professional guidance, you can effectively meet your VAT obligations while maintaining adherence to the tax laws in the UAE.
Need assistance with your VAT registration in the UAE? Get help from Shuraa Tax experts. Contact at +971508912062 or by email at [email protected] tailored solutions.