VAT Registration Threshold in UAE
In order to determine whether the value of consumables has exceeded the mandatory VAT Registration Threshold UAE limit or voluntary registration threshold limit, the following factors need to be considered.
Value of taxable supply of goods and services: Taxable supply refers to the supply of all goods and services manufactured in the UAE, in which value-added tax is levied at a standard rate of 5%, including zero-rated supplies. This does not include notified spare parts that are exempt from VAT.
Value of offset supplies: offset supplies are notified supplies. Compared with the receiver or purchaser, the value-added tax on the supplies should be collected and paid by the supplier from the buyer. When reaching the turnover threshold for VAT registration , the value of these supplies needs to be considered.
Import: The value of imported taxable goods and services that are taxable by the importer.
Let us take an example to understand how to calculate the VAT turnover threshold
Rose General Stores is a supermarket in the UAE that supplies groceries and all types of household products. They also import certain furniture products from other countries/regions and provide them to customers in the UAE before exporting to other countries/regions. The following are various consumables produced by Rose General Stores.
Types of supply turnover in AED
Taxable supplies (sold in the UAE) 375,000
Export (spare parts) 125,000
Exempt supplies 50,000
Import 100,000
Reverse charging supplies 25,000
In order to determine the registration qualification of Rose General Trader in the UAE, taxable supply + export (zero-rated supply) + import + reverse charge supply should be considered. Tax-free supplies will not be considered when the registration threshold is reached. The registration threshold of Rose General Trader is calculated as follows:
Types of supply turnover in AED
Taxable supplies (sold in the UAE) 375,000
Export (spare parts) 125,000
Import 100,000
Reverse charging supplies 25,000
VAT registration amount 625,000
Rose General Stores has a VAT registration turnover of Dh625,000, which has exceeded the mandatory registration threshold of Dh375,000. Therefore, Rose General Stores must be registered compulsory according to UAE VAT
Special circumstances for the calculation of VAT turnover thresholds registered in the UAE
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Existing business is acquired
If a person acquires an existing business, only the relevant portion of the value of the taxable supplies belonging to that person (taking over the business) should be considered. There is no need to consider all the consumables provided by the person who bought the business from it. The calculation of turnover for VAT registration will be similar to that discussed above.
Related party
A related party refers to two or more people who are not separated at the economic, financial or regulatory level. One of them can control the other party through the purchase of shares or voting rights. Under the above circumstances, the value of the taxable goods will be determined in detail in the implementation regulations of the UAE Value Added Tax Law which has not yet been provided.