Registering for VAT in UAE - All You Need to Know

VAT or value added tax is a federal tax that was introduced in January 2018 leading to the end of the long-standing tax-free status of the UAE. The VAT and the Federal Tax Authority (FTA) were established almost in the same period and these have helped the UAE government to a great extent in the collection of revenue in billions and in diversifying their revenue stream.

Every business that falls under the VAT threshold or scope needs to fulfill its duties as per the requirements set forth by the FTA. One major obligation for all businesses is VAT registration if they are eligible. Failing to do this can lead to legal complications and hefty penalties.

Navigating the complexities of VAT registration can be very difficult especially when you are a new business operating in Dubai. To make things easier, this blog covers the basics of UAE VAT so keep on reading till the end.

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• What is VAT in the UAE?
• VAT Registration Threshold
• Mandatory Threshold
• Voluntary Threshold
• VAT Exemption in the UAE
• VAT Penalties in the UAE
• How to Register for VAT in the UAE?
• Federal Tax Authority (FTA) Website
• What is FTA Website?
• Navigating the FTA Website
• Documents Required for VAT Registration
• Complete VAT Registration: Step By Step Guide
• Frequently Asked Questions

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What is VAT in the UAE?

Simply put, VAT or value added tax is an indirect tax levied on a business at every step of the supply chain where there is some value addition. This tax can be applied at any point from the production of the product to the final sale.

A 5% VAT rate is applicable in the UAE for eligible businesses as per the law. Though the VAT is actually paid by the customers, it is up to the businesses to collect it and pay it to the government.

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VAT Registration Threshold

The VAT registration threshold is the amount of turnover which a business is required to register for the VAT. Following are the two main types of VAT registration based on the revenue threshold.

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1. Mandatory Threshold

The mandatory threshold for VAT registration in the UAE is AED 375,000. Those businesses fall under this category whose total value of taxable supplies (sale of goods on which 5% or 0% VAT rate is charged) exceed the mandatory registration threshold over the last 12 months.

2. Voluntary Threshold

The businesses where the taxable supplies, imports, or expenses do not meet the mandatory threshold can voluntarily register for VAT. The threshold for voluntary VAT registration is AED 187,500. This option is especially useful for small startups as it allows them to claim input tax credit on every purchase they make.

VAT Exemption in the UAE

According to the UAE federal Decree Law No. (8) of 2017, there are certain sectors or instances where VAT registration is not mandated. These are as follows

• VAT is not applicable for bare land and the lease or sale of residential properties.
• Local passenger transport like buses, taxis, etc., are also exempt from this tax.
• Financial services provision fees, discounts, rebates, and commissions are also exempt from VAT registration.
• You are exempt from VAT if after reaching the mandatory threshold you do not make further taxable supplies.
• You are also exempt from VAT if you have applied for an exception and the relevant authorities have granted it.

VAT Penalties in the UAE

Failure to comply with the VAT registration rules and regulations may lead to penalties and fines. If you register for VAT after the due date, a fine of AED 10,000 is applied.

Moreover, non-compliance with the terms of VAT can lead to penalties of up to AED 50,000. If you don’t keep the deadlines of payments in mind, it can result in a 2% penalty on the unpaid tax due followed by a 4% monthly penalty.

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How to Register for VAT in the UAE?

Here is how you can register for VAT in the UAE and get the VAT compliance assistance

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Federal Tax Authority (FTA) Website

The first step of the registration process involves setting up an account on the Federal Tax Authority website.

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• What is the FTA Website?

To facilitate the VAT registration process, the FTA has launched a portal on its website. The registration process is carried out in a phased manner after the announcement of the deadlines based on the turnover of businesses.

When using this platform, you need to understand the details required to fill out the registration form to avoid unnecessary delays due to incorrect information.

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• Navigating the FTA Website

Here is how you can navigate the FTA website to create an e-Services account before registering for VAT

• Visit the FTA website and look for the sign-in option.
• Enter your personal email and then pick a unique and strong password.
• After that, you need to verify your account through email within 24 hours of its creation.

Once you have created the account, you can proceed as follows

• Login to your e-services account using the accurate email and password.
• Create the taxable person profile for the business
• Find the VAT registration form and fill its every section using the right details.
• The VAT registration form contains the following sections i.e.,some text
  • Entity details
  • Identification details
  • Eligibility details
  • Contact details
  • Business relationships
  • Bank details
  • Additional details (import, export, customs)
  • Authorized signatory

‍Documents Required for VAT RegistrationFollowing are the essential documents that you need to register VAT

• Valid Trade License
• Memorandum of Association
• Proof of authorization for the authorized signatory(s)
• Passport and Emirates ID of the authorized signatory(s)
• Passport and Emirates ID of the shareholder(s)
• Bank Details
• Contact information
• Basis for Registrationsome text
  • Sales Invoices stamped and signed by the authorized signatory, or
  • Tax Invoices stamped and signed by the supplier
• Monthly turnover declaration for the specified periods that is signed and stamped by the authorized signatory on the entity’s printed letterhead

‍Complete VAT Registration: Step-By-Step GuideYou can complete the VAT registration process as follows:

• Check your eligibility by looking at your annual taxable turnover.
• Gather and prepare all the necessary documents and information to fill out the VAT registration form.
• Create an e-services account, access the VAT registration form, and fill it out.
• Review the form and then submit the VAT registration application.
• If additional information is requested, provide all the supporting documents to help FTA verify the accuracy of the data that you have provided them.
• In the last step, the FTA will look at your application and then issue a tax number and a VAT certificate.
• This number and certificate are proof that your business adheres to VAT regulations. The whole process of VAT registration can take up to 30 days.

   ConclusionKnowing about the VAT rules and registering yourself before the deadline is crucial for the smooth running of your business in the UAE. You need to make sure to keep the deadlines in mind and seek professional help where necessary to avoid mistakes when registering for VAT.The information given above can help you navigate the VAT registration process in less time and without any major mistakes. You can follow this quick guide to register for VAT and ensure compliance with the FTA tax rules.Visit Alpha Pro Partners today to get professional VAT registration services, accounting solutions, and tax compliance services all over the UAE.    

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‍Frequently Asked Questions‍

1. How to know the date for VAT return filing in the UAE?

The date for VAT return filing is no later than 28 days following the tax period or the date specified by the FTA on its website.

2. What documents are required for VAT registration in the UAE?

For VAT registration you need Valid Trade License, Memorandum of Association, Proof of authorization for the authorized signatory(s), Passport and Emirates ID of the authorized signatory(s), Passport and Emirates ID of the shareholder(s), Bank Details, Contact information,  Supporting financial documents (e.g., invoices/LPOs/contracts/title deed/tenancy contracts), etc.

3. Are there any exemptions from VAT in the UAE?

Yes, some exemptions from the VAT are applicable to certain financial services and the supply or renting of residential real estate.

4. Which software is useful for VAT in the UAE?

A simple and user-friendly software for VAT registration in the UAE is Wafeq.

5. Is VAT registration required for export businesses in the UAE?

If your business's taxable supplies and imports exceed AED 375,000 per annum, you are required to register for VAT, regardless of whether you are engaged in exporting goods or services.

6. How to find my effective VAT date?

Your VAT registration certificate from the FTA will have the date when VAT obligations started for your business. This is often the same as the date your registration was approved.