Who Needs to Register for VAT in the UAE? Thresholds and Requirements Explained

VAT is a consumption-based tax in the UAE, and it is charged at 5% on most commodities and services. Businesses are intermediaries that receive VAT payments and make them to the Federal Tax Authority (FTA). VAT can seem simple, but the challenge is in knowing when a business needs to register and proper documentation and reporting.

Compulsory VAT Registration Limits.

Companies are required to include VAT in the UAE in case their taxable imports and supplies reach a certain threshold:

AED 375,000 annually -Any business whose taxable supplies reach this amount will have to be registered.
Calculation – The threshold is composed of all standard-rated, zero-rated supplies and imports that are subject to VAT.
Timeframe – The businesses are required to an apply for VAT registration within 30 days as soon as they cross the threshold.

Not registering in time can lead to fines, retroactive VAT payment, and interest.

Voluntary VAT Registration

Whereas businesses with a turnover of more than AED 375,000 are required to be registered, voluntary registration can be conducted for businesses whose turnover is less than AED 187,500 per annum.

Businesses that are not required to be registered under VAT.

Not all entities are required to be registered under VAT in the UAE. Exemptions include:

Businesses supplying solely with exempt supplies (e.g., financial services other than initial supply, residential property after first supply).
Under the FTA rules, government bodies and authorities were exempt.
Small enterprises that have a voluntary minimum threshold of less than AED 187,500.

Knowledge of exemptions helps to make sure that the businesses do not pay unnecessarily for compliance.

VAT Registration UAE: Registration and Procedure.

VAT registration in UAE is a procedural process that is done via the FTA online portal. Information and documents that are needed are:

Business Trade License: This is a valid commercial license from the UAE authority.
Owner/Partner Passport and Emirates ID – Identity authentication of the stakeholders.
Contact Pages – Email, cell phone number, and address of registered office.
Bank Account Information – IBAN and account information of the transaction.
Financial Records – 12 months turnover and estimated revenue.
Customs Details (where necessary) – Import/export details on businesses operating the cross-border trade.

VAT applications are usually processed by FTA in the course of 20 business days. The businesses get a Tax Registration Number (TRN), and this number is required to be quoted in all the invoices.

Effects of failure to register.

Failure to comply with the regulations of VAT registration has very serious implications:

Administrative Fines – Certain fines and day-to-day fines until compliance.
Business restriction – The inability to provide valid tax invoices.
Reputational Risk – Non-registered companies may not be willing to work with clients and partners.
Laws – Trade license may be suspended in the worst-case scenario.

VAT Registration Advantages.

VAT registration in the UAE has several non-compliance advantages:

Input VAT Recovery -Businesses recover the paid VAT on purchases and expenses.
Market Credibility- TRN builds credibility with clients and government agencies.
Easy Operations – The registered companies do not experience a lot of delays at the customs clearance or government approvals.
Expansion Preparation – Registration denotes that businesses are prepared to expand.

How tax consultants in Dubai help?

VAT compliance may be daunting to many businesses. The VAT Registration UAE can help to simplify it with professional help. Services include:

End-to-End VAT Registration- Handling of applications and submission of documents.
Threshold Assessment- assisting businesses to know when they should register.
Compliance Monitoring – Making sure to file returns on time and update submissions.
Consulting and Training – Providing advice to business owners and employees on how to do VAT.