VAT Registration in UAE

In 2018, the authorities of the UAE put forth a VAT (Value Added Tax) regime for businesses. This regime requires them to register for VAT upon exceeding the threshold for obligatory registration set for taxable supplies and imports.

Companies registering for VAT in the Emirates must complete an online registration application on the website of the Federal Taxation Authority (FTA). The application process requires the provision of information about the company, its activities, and financial data. Once submitted, it is subject to FTA verification and processing.

After the process is complete, company owners receive a VAT registration certificate with a tax registration number and are then obligated to comply with the FTA regulations. This includes charging VAT on taxable supplies, submitting VAT returns, and issuing VAT invoices.

Overall, VAT registration is vital for UAE companies that fall under the threshold criteria, and it is essential to understand and fulfill obligations under the VAT regime to avoid any issues with the tax authorities.

Who needs to register for VAT in the UAE?

The criteria for VAT registration in Dubai and other Emirates is determined by a company’s overall income, which reaches the threshold of AED 375,000. Regardless of when they get to this limit, this is the point where they need to do registration or file for an exemption, whichever is applicable.

VAT taxation in brief

Understanding VAT and VAT rates in the UAE is essential for businesses before proceeding to VAT registration and VAT filing:

• Standard VAT rate (5%): Applied to most goods and services, with businesses required to charge and remit 5% VAT.
• Zero-rated supplies: Taxed at 0%, allowing businesses to recover input VAT on related expenses.
• Exempted supplies: No VAT is charged, but input VAT recovery is not permitted.
• Out-of-scope supplies: Transactions beyond UAE VAT jurisdiction, not subject to VAT.

VAT registration requirements

VAT registration in the UAE can be broken down into the following categories:

• Obligatory VAT Registration. The threshold for obligatory VAT registration in effect in the UAE is set at AED 375,000. Once a company reaches this limit in its general turnover, its owners have to proceed with VAT registration as dictated by tax regulations. It is advisable to anticipate when their revenues hit this threshold and to register beforehand to avoid penalties.
• Voluntary VAT Registration. A business owner can exercise the option of applying for VAT registration at his own will if it is beneficial for the company’s operations and if the overall amount of its turnover goes beyond the voluntary registration limit established at AED 187,500.
• Exception from VAT Registration. Companies do not have to undergo VAT registration in the UAE if the overall value of their supplies is lower than the voluntary registration limit of AED 187,500. Another VAT exception option is supplying exclusively goods and services that fall under 0% VAT. If your company supplies goods and services exclusively outside the UAE and GCC VAT implementing countries and your revenue approaches AED 375,00, you can decide to file for an exception. If FTA grants you the exception, there is no need to file the VAT. If the exception is not granted, you will need to do the VAT filing quarterly, however, it will be 0%-rated.

Paperwork requirements for VAT registration

In order to register for VAT in Dubai and other Emirates, business owners need to provide the following list of documents required for VAT registration in the UAE:

• Trade license and/or commercial registration certificate
• Incorporation certificate (for corporate entities)
• Passport and Emirates ID of the business owner(s)
• Details of authorized signatories
• Contact details of a shareholder & authorized person (Email ID & UAE Mobile number)
• Detailed bank account information
• Financial statements and records
• Details of business activities and anticipated turnover
• Customs authority code (if applicable)
• Any other relevant documentation related to the company's operations and activities.

It is advisable to consult with the Federal Taxation Authority or a professional tax advisor to ensure all necessary documents for VAT registration are prepared and submitted accurately.

VAT registration deadlines in the UAE

The time limit for VAT registration in the UAE depends on when the company gets to the established overall turnover limit of AED 375,000. The FTA has opened its online registration portal for businesses, so they can prepare for VAT registration beforehand. Currently, the regulations mandate businesses to register for VAT upon exceeding the thresholds for taxable turnover set forth by the FTA for voluntary or obligatory registration.

• Obligatory VAT registration is to be done within a 30-day period after reaching the AED 375,000 threshold.
• Voluntary VAT registration is to be done within a 30-day period after reaching the AED 187,000 threshold.

Penalties for late VAT registration

Non-compliance with VAT registration deadlines in the UAE can result in significant fines. Businesses that fail to register within 30 days of surpassing the turnover threshold face a penalty of AED 10,000. Missing the deadline for deregistration incurs AED 1,000 per month, capped at AED 10,000.

In addition, late VAT payments attract escalating fines: an immediate 2% of the unpaid amount, an additional 4% after seven days, and a daily penalty of 1% after one month, which can reach up to 300% of the original tax owed.

Turnover calculation for VAT registration

In the UAE, the turnover calculations for VAT registration are made on the basis of the total value of taxable transactions carried out by a company during the next 30 days or the previous 12-month period. In the process of turnover calculations for VAT registration, business owners should the following into account:

Taxable supplies

This refers to the overall amount of goods and services sold by a company that are subject to VAT at the standard or zero rate, excluding any supplies that are outside the VAT spectrum.

Exempt supplies

This refers to VAT-exempt supplies, and the turnover from these supplies does not have to be taken into account in VAT threshold calculations.

It's important that businesses thoroughly calculate their turnover and assess whether it goes beyond the registration thresholds. Failing to register for VAT in due time can cause penalties and fines. Additionally, the VAT rules and thresholds may be updated by the FTA, so business owners are strongly advised to stay informed of any alterations in the registration requirements.

Application procedure for VAT registration

In accordance with the UAE regulations regarding VAT registration, the application procedure presently consists of the following steps:

1. Determination of eligibility. Check if your business is eligible for obligatory or voluntary VAT registration.
2. Document preparation. Gather the documents and information required for VAT registration in the UAE.
3. Registration via the FTA portal. Visit the web portal of the Federal Taxation Authority to create an e-Service account, log in, and fill out the online VAT registration form. You will be required to provide the necessary details and upload the required documents in the 8 sections of the form.
4. Application submission. Complete and submit the application. Once it is done, the application will be processed by the FTA. During the review, it may in turn require the company owner to provide additional information or paperwork.
5. Receiving the registration certificate. Once the application is successfully reviewed and approved, you will be granted a VAT registration certificate from the FTA along with your tax registration number (TRN).

It should be noted that VAT registration is an essential legal condition for eligible businesses, which is why it is vital to ensure that your company satisfies UAE’s requirements for VAT registration. To do so, it is recommended to contact a tax adviser for accuracy in registration eligibility and fulfillment of requirements.

VAT group registration in the UAE

In the UAE, there is a VAT group registration option available to companies that meet a set of conditions. Registering as a VAT group allows a group of companies to act as a single taxable entity when it comes to charging VAT. This can provide certain advantages for businesses, such as facilitating compliance with VAT regulations in place, decreasing the overall administrative burden, and potentially optimizing VAT recovery.

To be eligible for VAT group registration, the group of companies must fit the following requirements:

• The companies must be related parties and have close organizational, economic, and financial ties, meaning they are under common control or ownership or one member controls the others.
• The members of the group must be established or have a place of residence in the UAE.

The representative member of the group must submit the necessary application to the FTA as part of the application procedure for VAT group registration. The application must include details of all group members and their consent to join the VAT group.

Once the registration process is complete, the VAT group members will be treated by the FTA as a single taxable entity. This means they will file a single VAT return and make a single VAT payment for the group as a whole.

It is important for businesses considering VAT group registration to carefully contemplate the requirements and implications of being part of a VAT group, which may include seeking consultancy or following up with the relevant authorities.

Post-VAT registration checklist: Key steps to stay compliant and grow your business

• Charge VAT correctly: Apply the 5% VAT on taxable supplies and reflect the tax in your invoices.
• Maintain accurate accounting: Ensure proper bookkeeping to calculate VAT correctly, file error-free returns, and reclaim input tax (VAT). Keep detailed records for 5 years.
• Meet deadlines: Stay on top of VAT return and payment deadlines.
• Stay updated: Regularly check for updates from the Federal Tax Authority (FTA) regarding VAT regulations in UAE.
• Consult experts: Work with tax professionals and accountants to avoid fines, legal issues, and to free up time for business growth.

Ensure UAE VAT registration compliance with Emirabiz

At Emirabiz, we simplify your business's financial management by offering reliable accounting and bookkeeping services. Our team ensures that your VAT and tax registration and reporting is accurate and timely, so you can stay compliant without the stress.

Outsourcing your accounting needs to Emirabiz means you don’t need an in-house accountant. Our experienced professionals use advanced software to handle your financial obligations, saving you time and resources, while keeping your business in full compliance with UAE regulations.

If you need help with the VAT registration of your business, contact our team today to get a free VAT consultation!