Value Added Tax (VAT) was introduced in the UAE on 1 January 2018 with a rate of VAT 5%. The VAT, as a general consumption tax, will apply to the majority of transactions in goods and services. UAE imposes VAT on tax registered businesses on a taxable supply of goods or services at each step of the supply chain. VAT registered businesses collect the amount on behalf of the government; consumers bear the VAT in the form of a 5% increase in the cost of taxable goods and services they purchase in the UAE.
Being registered under the VAT law means that a business is acknowledged by the government, as a supplier of Goods and Services and is authorized to collect VAT from customers and remit the same to the government. Contact us for online registration for vat. Only VAT registered businesses will be allowed to do the following:
- Charge VAT on taxable supply of goods and services
- Claim Input Tax Credit on VAT paid on their purchases, which will be deducted from VAT liability on sales
- Payment of VAT to the government
- Periodic filing of VAT return
Apart from the above, all registered businesses have to align their business reporting structure in line with the compliance requirements such as accurate and updated books of accounts, tax paid documents such as Tax invoice, credit notes, debit notes, records to all inward supplies and outward supplies etc. are required to be maintained.
Therefore, understanding the fundamentals of VAT will be one of the important steps for your VAT preparation and obtaining VAT registration UAE will be the first step towards transiting your businesses to the VAT era.
Who should register under VAT?
Are all businesses liable to register under VAT? No, only those businesses crossing the defined annual aggregate turnover threshold are liable to register under VAT. Based on the registration threshold, a business will either be mandated to register or as an option, a business can apply for registration or can seek exemption from VAT registration online.
On this basis, VAT Registration in the UAE can be classified into the following:
- Mandatory VAT Registration
- Voluntary VAT Registration
- Exemption from VAT Registration
Mandatory VAT Registration in UAE
All the businesses who have a place of residence in the state of UAE and whose value of supplies in the member states in the previous 12 months has exceeded AED 375,000 should mandatorily register under UAE VAT. Also, if the businesses anticipate that the total value of supplies will exceed the mandatory VAT registration threshold of AED 375,000 in the next 30 days, then they too will have to register under UAE VAT.
Those businesses, who do not have a place of residence in the state of UAE, will have to compulsorily register under VAT irrespective of the registration threshold.
Mandatory VAT Registration
Type of Business
VAT Registration Threshold Conditions
Value of Supplies exceeds AED 375,000
In Previous 12 Months
Anticipated to exceed in next 30 days during the current financial year
Threshold limit is not applicable
Compulsorily registration under VAT irrespective of threshold
Voluntary VAT Registration in UAE
All the businesses having a place of residence in the state of UAE who are not required to mandatorily register under VAT, are given an option to voluntarily apply for VAT Registration. This can be done, only if the annual supplies or taxable expenses incurred is not less than the voluntary registration threshold The Voluntary VAT UAE Registration Threshold is AED 187,500 which is 50% of the mandatory registration threshold.
Here, the VAT Registration are not mandatory, it is optional for business to decide whether they would want to register. The inclusion of taxable expenses as criteria to determine the eligibility for voluntary registration provides an opportunity for all the start-up business to register under UAE VAT. This is because, as a start-up, the turnover or value of supplies may be lesser but there is a high possibility that huge amount of taxable expenses would have been incurred in starting the business or during the initial stage of the business. As a result, the inclusion of taxable expenses as a criteria for voluntary registration would enable all the start-up business to register with zero turnover.
VAT Registration Dubai Exemption
The businesses whose value of supplies in the member states is below the voluntary VAT Registration Dubai threshold of AED 187,500 are not allowed to register under UAE VAT. Also, the businesses who are engaged in making only zero-rated supplies may request for VAT Registration exemptions.
How to Apply for VAT Registration in UAE
In UAE, the businesses whose turnover exceeds AED 375,000 have to mandatorily apply for vat in UAE registration. To facilitate the businesses to register, the Federal Tax Authority (FTA) has opened its portal for online VAT registration. The deadlines based on the turnover of businesses are already announced by FTA and the registration will be carried out in a phased manner. While it is crucial for businesses to determine their obligation towards VAT registration, it is also important for businesses to know how to apply for VAT Registration and understand the level of details required to complete the online registration process. Download vat registration form UAE from our Website.
This is because, before applying or starting the online VAT registration process, having a good understanding about the type of details required and steps to complete the online VAT registration will help you to prepare well in advance. As a result, the registration process can be completed easily and can avoid unnecessary delays due to furnishing of incorrect details which could even lead to rejection of registration application.
What is a VAT Group Registration?
In UAE VAT Registration, two or more persons conducting businesses may apply for Tax Registration as a Tax Group. A tax group is a group of two or more persons registered with the FTA as a single taxable person subject to fulfilment of conditions under UAE VAT Law. This group registration is only for the purpose of tax. If you are planning to vat registration in Dubai then You are landing at the right place.
Conditions for Applying VAT Group Registration
To be eligible for applying for VAT Group registration, all of the following conditions need to be fulfilled.
Each person shall have a place of establishment or fixed establishment in the State:
This implies that each person should have either of the below-mentioned establishments in UAE :
- Place of Establishment: The place where a business is legally established in UAE pursuant to the decision of its establishment, or a place in which significant management decisions are taken and central management functions are conducted.
- Fixed Establishment: Any fixed place of business, other than the place of establishment, in which the person conducts his business regularly or permanently and where sufficient degree of human and technology resources exist which enables the person to supply or acquire Goods or Services. This includes branches, which are also considered as the fixed establishment.
The relevant persons shall be Related Parties:
Here related parties refer to two or more persons who are not separated on the economic, financial or regulatory level, where one can control others either by Law or through the acquisition of shares or voting rights.
One or more persons conducting business in a partnership shall control the others:
This implies that one or more person who are related controls the other business. For example, officers or directors of one another’s businesses, partners in each other’s business etc.
VAT Group Registration Benefits
The following are the benefits of VAT Group Registration for the business
- All the entities within a VAT Group will be treated as ‘ONE’ entity for VAT purpose. This will help the businesses in simplifying accounting for VAT, and also compliance reporting like VAT returns are required to be prepared and reported at the group level instead of entity level.
- Any supplies within the entities of a VAT group are out of the scope of the VAT. This means VAT will not be levied on the supplies between the entities of a VAT Group. However, supplies made by the VAT group to an entity outside the VAT group are subject to VAT.