Value Added Tax (VAT) is an indirect tax on the consumption of services and goods. The UAE imposed VAT on January 1, 2018, at a 5% standard rate. All businesses within the UAE are required to follow VAT rules imposed by the Federal Tax Authority (FTA). This guide offers an overview of VAT registration UAE, including requirements, how to register, and important business considerations.
Who Must Sign Up for VAT in the UAE?
VAT registration in the UAE is compulsorily required or optional, dependent on certain turnover limits:
Mandatory VAT Registration:
Trade must sign up for VAT where their taxable revenues and imports pass AED 375,000 annually. By doing so, businesses that attain the threshold shall contribute to the tax system.
Voluntary VAT Registration:
Businesses with taxable supply and imports from AED 187,500 up to AED 375,000 have the option for voluntary VAT registration. This proves to be favorable for startups and expanding businesses as it permits them to claim back VAT incurred on expenses.
Exemptions:
Some industries and transactions are exempt from VAT registration, for example, specific financial services, residential property, and local transport of passengers.
VAT Registration Process in Dubai, UAE
Registration with VAT at the FTA is an easy process that can be done online by businesses. The major steps are detailed below:
Create an FTA Account: Go to the FTA’s e-Services portal and register for an account.
Fill out the VAT Registration Form: Enter information like business data, contact information, financial data, and projected taxable supplies.
Upload necessary documents: The following documents are generally needed:
- Trade license
- Owner’s passport and Emirates ID
- Business activity details
- Financial records (e.g., bank statements, turnover records)
Submit the Application: The FTA will process the application and provide a VAT Registration Number (TRN) after approval once submitted.
Key Considerations for VAT Compliance
Once registered for VAT, companies have to adhere to many regulatory requirements:
1. VAT Invoicing:
Companies are required to provide tax invoices containing VAT information, including TRN, invoice date, and VAT amount.
2. VAT Returns Filing:
Registered companies need to submit VAT returns to the FTA, typically quarterly. The returns report VAT received and VAT incurred on purchases.
3. Payment of VAT
Companies are required to pay VAT obligations to the FTA ahead of time to avoid fines.
4. Record Keeping
Proper record-keeping of transactions, invoices, and VAT documents for a minimum period of five years is compulsory.
Deregistration from VAT in the UAE
Companies might have to deregister from VAT in certain situations:
If taxable supplies are less than AED 187,500.
If business operations stop.
If the business does not satisfy VAT registration thresholds anymore.
Deregistration needs to be done via the FTA portal, and non-compliance can attract penalties.
General Problems in VAT Registration and Compliance
- Most businesses encounter problems with VAT registration and compliance, such as:
- Mistakes in registration applications cause delays.
- Misinterpretation of VAT regulations causes wrong tax returns.
- Lack of proper records, which may result in audits and fines.
- Hiring professional VAT consulting services may assist companies in dealing with VAT requirements effectively.
Conclusion
VAT registration in the UAE is an important step for companies to abide by tax regulations and avoid fines. When registering for VAT in Dubai or any other location in the UAE, companies need to ensure accurate documentation, timely submissions, and compliance with FTA regulations. With knowledge of the VAT registration process and compliance requirements, companies can efficiently manage their tax responsibilities and concentrate on expansion.
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