VAT Registration in UAE
The United Arab Emirates (UAE) has become one of the world’s thriving business markets and an ideal destination for international investment. If you are a business owner in the UAE or want to set up a company in the UAE, you must assess the requirement to register the business under VAT regulations. HLB HAMT, with its team of experts, offers a variety of VAT services, including UAE VAT registration services.
Vat Registration Documents required in UAE
The method and procedure for VAT registration in the UAE is rather straightforward, and to register for VAT, one needs to provide the following documents.
- A copy of your business license
- The company’s Memorandum of Association (MOA)
- A copy of the Emirates ID held by the owner and partners
- Details of the business and the bank account
- The income statement for the previous 12 months
- Copy of the company owner’s and partners’ passports
- The structure of the business and the action plan
Types of VAT Registration in UAE
- If the total amount of its taxable supplies and imports during the past 12 months reaches the mandatory threshold; or
- If the total amount of the company’s taxable supplies and imports is expected to surpass the mandatory registration threshold in the next 30 days.
- If the total amount of its taxable supply, imports, or taxable costs in the previous 12 months exceeds the voluntary registration threshold; or
- If the entire amount of the business’s taxable supplies, imports, or taxable costs is expected to surpass the voluntary registration threshold in the next 30 days.
A. Mandatory Registration
It is mandatory for a company to register for VAT:
B. Voluntary Registration
Voluntary Registration is an option for a business:
Limit of Threshold
Businesses having an annual revenue of more than AED 375,000 must register and account for VAT by law, while those with an annual turnover of between AED 187,500 and AED 375,000 can register voluntarily.
Registration of VAT Groups in UAE
The VAT Group Registration procedure involves two or more enterprises forming a group with the purpose of paying a single tax. After registering under the Group VAT scheme, the entities in question acquire a unified VAT number and can submit a single return. A VAT group allows persons and enterprises that are economically, socially, linked to operate as if they are one VAT entity. The parties involved must satisfy the following standards in order to form a VAT group:
- Every participant ought to have a fixed establishment in the UAE [a ‘fixed establishment’ is a site where a company is officially registered in the UAE or where key management choices are taken and management responsibilities are performed].
- The relevant stakeholders should be linked on a social, economic, or legal basis.
The benefits of VAT Group Registration for businesses are as follows:
- For VAT purposes, all businesses within a VAT group shall be recognized as “ONE” entity. This would help businesses streamline VAT accounting and monitoring operations like VAT returns, which must be created and lodged at the group level rather than the company level.
- Any supplies made within a VAT group’s entities are not subject to VAT and are considered as Out of Scope or disregarded supplies On the other hand, supplies made by the VAT group to entities outside the VAT group are liable to VAT.
Sectors exempted from VAT
VAT exemption will be granted to the following types of goods and services:
- The provision of some financial services (clarified in VAT legislation)
- Residential Properties
- Bare land
- Passenger transport in the local area
VAT Penalties in UAE
If companies violate VAT legislation in the UAE, they will be subject to substantial FTA VAT fines. Businesses must maintain VAT compliance in accordance with the FTA in order to avoid VAT fines and penalties. Before integrating VAT in the organization, they must confer with a tax specialist.
- AED 10,000 fine for late VAT registration
Failure to pay the tax reported in the tax return form within the timeframe required by the tax legislation results in late VAT payment penalties. The penalty for not paying VAT on time will be as follows:
- A penalty of 2% of the unpaid tax is levied the next day of due date.
- Any sum that is still outstanding will be subject to a 4% monthly penalty from next month.
- Penalty of maximum 300 percent a calendar month after the payment deadline.
Calculation of turnover for the purpose of VAT registration in UAE
In the United Arab Emirates, the turnover threshold for VAT registration is DH 375,000 or more in the event of mandatory registration and DH 187,500 or more but not more than DH 375,000 in the case of voluntary registration.
The following are the supplies that should be addressed while crossing the threshold:
- VAT is payable at the basic rate of 5% on supplies made to consumers.
- Supplies to clients for whom the VAT rate is nil.
- Goods that have been imported
- Services for reverse charging
It’s worth noting that supplies that aren’t subject to VAT aren’t included in the computation of turnover for VAT purposes.
What is the deadline for VAT Registration Services in Dubai?
As the UAE government established VAT registration services in Dubai, firms from all sectors, jurisdictions have been welcomed to apply. An individual can register for VAT registration at any time during the year, subject to FTA’s acceptance of category-by-category applications. However, before continuing with the application procedure, one must have all of the necessary qualifications.
What are the few factors to take into account while supplying bank data for VAT registration purposes in UAE?
When a corporation registers for VAT as a stand-alone entity, it can supply information about one of its bank accounts in the United Arab Emirates.
The entity must submit information such as the bank’s name, branch’s name, account title, and so on.
If two or more entities seek to register for VAT as a group, the information of one of the two entities’ single bank accounts (ideally a joint account) would serve.
VAT Registration Services for Foreign Investors in Dubai
When foreign investors are conducting business operations in UAE, they must register for VAT. Upon successful registration, users will acquire a Tax Registration Number, much like other firms.
Why HLB HAMT?
Since its inception, HLB HAMT has been a major business consultant, providing accounting and tax services to commercial businesses on a global basis. Our VAT experts will assist your business with VAT registration in the UAE procedure and structure it in the most cost-effective way.
Frequently Asked Questions – VAT Registration
Is it necessary to submit the VAT registration application in Arabic or can English be used instead?
Even though the application for VAT registration is completed in English, the applicant must give information in Arabic in three columns of the application form. The following is a list of the Arabic information that must be provided:
- Name of the business
- Name of the manager
- Name of the authorized signatory
Is it necessary for an individual to pay VAT on imported goods in UAE?
Products and services, including imported goods and services, are subject to VAT.
What are the implications of registering VAT for businesses in UAE?
Businesses in the UAE can use VAT registration to recover back input tax on business expenditures and purchases. If your company isn’t registered for VAT, you’ll be losing all of your input tax charges.
What conditions are required to register for VAT in the United Arab Emirates?
If taxable supplies and imports surpass the statutory registration level of AED 375,000 in the previous 12 months, a firm must register for VAT.
Who is a taxable individual?
A taxable person is an individual who engages in business activities and has a revenue of more than AED 375,000.
What is meant by the VAT Reverse Charge Mechanism?
In the United Arab Emirates, the reverse charge system for VAT is used on imported products and services. The supplier is exempt from paying vat; however, the beneficiary is liable for paying vat, which he can reclaim through input vat returns.
Is there any tax grouping in the United Arab Emirates?
By registering as a VAT tax group in the UAE, businesses will be able to meet the criteria of the taxation legislation. A tax group would be advantageous for some firms since it streamlines the VAT accounting procedure in the UAE.
When is it suitable to use customer VAT number in UAE?
To invoice without VAT, a provider of goods and services to a receiver in another GCC nation will need to have a customer VAT number.
What are the exempt from VAT in the UAE?
- Residential Properties
- Bare land
- Passenger transport in the local area
- Financial services such as life insurance that aren’t offered at a discounted rate or for any other reason.
Is it possible for a UAE national to claim VAT?
Nationals of the United Arab Emirates (UAE) are eligible for a VAT refund on the building of a new house for personal use.
Latest insights, case studies and news from across the network
VAT Public Clarification On Gold-Making Charge in UAE
The supply of the making services does not fall under the special reverse charge mechanism under Cabinet Decision No. 25 in cases of multiple supplies.
VAT Transactions between UAE branch and foreign Head Office
Article 1 of the VAT Decree-Law defines a person as a natural or legal person…
FTA’s Revamp on Tax Administrative Penalties in UAE
The recent Cabinet decisions on administrative penalties came forth as a relief for the business sector as the reduction