VAT registration involves submitting details such as trade licenses, owner identification, and financial documents online through the UAE’s official tax portal. VAT-registered businesses are required to file returns quarterly, paying the net VAT (difference between collected and paid VAT) to the Federal Tax Authority (FTA). The standard VAT rate in the UAE is 5%, with certain goods and services categorized as zero-rated or exempt. Businesses must maintain proper documentation to claim input tax credits on purchases.
What is VAT-
VAT is an indirect tax imposed on the supply of goods and services and is charged at each stage of the supply chain. The end-consumer bears the VAT while registered taxpayers collect the tax on behalf of the government.
Eligibility of VAT registration:
The thresholds for businesses to register for VAT are based on the value of their taxable supplies, which include standard-rated supplies, zero-rated supplies, reverse charges received, and imported goods.
1. Mandatory Registration
A business must register for VAT if the total value of its taxable supplies and imports within the UAE exceeds the mandatory registration threshold of AED 375,000, either during the previous 12 months or within the upcoming 30 days.
2. Voluntary Registration
A business can voluntarily register for VAT if the total value of its taxable supplies and imports within the UAE exceeds the voluntary registration threshold of AED 187,500, either during the previous 12 months or within the upcoming 30 days.
A business can also register voluntarily if its expenses exceed the voluntary registration threshold.
3. Non-resident Registration
A non-resident doing taxable business in the UAE needs to register for VAT regardless of the above-mentioned thresholds.
VAT Group Registration (if applicable):
- If both entities are related entities (e.g., parent and subsidiary companies), you may apply for VAT group registration, which allows multiple entities to register as a single VAT entity, simplifying compliance.
VAT Registration (Steps):
The following are the steps while taking the VAT Registration:
a. Entity Details
b. Identification Details
c. Eligibility Details
d. Contact Details
e. Business Relationships
f. Bank Details
g. Additional Details
h. Authorized Signatory
i. Review and Declaration
We need to Register VAT through E- Services tab on the following official website of UAE: https://tax.gov.ae/en/default.aspx
Requirement list for Registration:
To register for VAT in UAE, businesses must complete the required documents. The process for VAT registration and fee submission will be done online. The following documents are required for VAT registration in UAE.
1. Copy of Trade License (must not be expired).
2. Passport copy of the owner/partners who own the license (must not be expired).
3. Copy of Emirates ID of the owner/partners who owns the license (must not be expired).
4. Memorandum of Association (MOA) – (not required for sole establishments).
5. Contact details of the company (complete address and P.O Box).
6. Concerned person’s contact details (Mobile Number and E-mail).
7. Bank Details (Bank Statement, Account Number, Account Name, Bank Name, Branch Name & IBAN).
8. Turnover & Expense Declaration for the last 12 months (must be signed, stamped and printed on company letterhead).
9. Business is doing export and import
10. Business is dealing with any custom department? If yes, then attach the VAT Registration Letter.
VAT Returns in UAE
VAT-registered businesses shall submit the VAT return and make payment of VAT liability every quarter to the FTA. The registered taxpayers must complete VAT return filing and VAT payment before the 28th day from the end of the quarter. However, the FTA may assign a different tax period to a certain group of taxable persons.
What is the VAT rate in UAE?
FTA announced a standard VAT rate of 5%. However, the FTA categorised a few goods and services under zero-rated supply and exempt supplies where no tax is charged.
Input tax under UAE VAT
Input tax means the VAT paid or due to the supply of goods or services or during an import. Businesses in UAE shall keep the invoice and import documents to claim the input tax paid on the purchases.
How is VAT calculated?
When filing a VAT return, businesses must arrive at the net tax liability, i.e., the difference between the VAT collected and paid, then pay it off to the government. And in case in any quarter Input VAT is more than Output VAT then the registered seller receives a tax credit/ refund on the VAT paid on purchases.
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Authors: Sachin Ostwal | Associate Consultant | LinkedIn Profile |Shreyans Dedhia | Partner at Bilimoria Mehta & CO. | LinkedIn Profile
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