When determining if the value of supplies has exceeded the mandatory or voluntary registration threshold limits in the UAE, several factors must be taken into account:

1. Taxable Supply of Goods and Services: Taxable supplies encompass all goods and services provided in the UAE, subject to the standard VAT rate of 5%, including zero-rated supplies. This excludes notified supplies that are exempt from VAT.

2. Reverse Charge Supplies: Reverse charge supplies are notified supplies on which the recipient or buyer is responsible for paying VAT to the government. This differs from the forward charge, where the supplier collects VAT from the buyer and remits it. The value of reverse charge supplies should be considered in calculating the turnover threshold for VAT registration.

3. Imports: The value of taxable goods and services imported, for which the importer is liable to pay tax.

Let’s illustrate how to compute the VAT turnover threshold with an example:

Consider Rose General Stores, a supermarket in the UAE that deals in groceries, household products, and imports home furnishings. They supply these products within the UAE and also export them. Rose General Stores’ various types of supplies are as follows:

Type of Supplies Turnover in AED
Taxable Supplies (Sales in UAE) 375,000
Exports (Zero-Rated Supplies) 125,000
Exempt Supplies 50,000
Imports 100,000
Reverse Charge Supplies 25,000

To determine Rose General Stores’ eligibility for registration in the UAE, we should consider taxable supplies, exports (zero-rated supplies), imports, and reverse charge supplies. Exempt supplies are not included in the registration threshold calculation. The registration threshold for Rose General Stores is as follows:

Type of Supplies Turnover in AED
Taxable Supplies (Sales in UAE) 375,000
Exports (Zero-Rated Supplies) 125,000
Imports 100,000
Reverse Charge Supplies 25,000
VAT Registration Turnover 625,000

Rose General Stores’ VAT registration turnover is AED 625,000, which exceeds the mandatory registration threshold of AED 375,000. Therefore, Rose General Stores must register for VAT in the UAE.

Exceptions to VAT Turnover Threshold Calculation for Registration in the UAE:

1. Acquisition of an Existing Business: If an individual acquires an existing business, only the relevant part of the taxable supplies’ value that belongs to the new owner should be considered for registration. The total supplies made by the previous owner are not necessary for this calculation.

2. Related Parties: The determination of the value of taxable supplies for related parties will be detailed in the executive regulations of the UAE VAT law, which are yet to be made available. Related parties involve two or more individuals or entities not separated on economic, financial, or regulatory levels, where one can control the others through legal means, share ownership, or voting rights.

You can also Register for VAT Registration on our website:
https://thevatconsultant.com/