If your UAE-based business has revenue above AED 375,000 of taxable supplies over the last 12 months, you are probably required to register for VAT.
There are a few exceptions to the requirement to register, such as if your business only supplies products or services classified as exempt from VAT. This includes some financial services and the rental of property. You can also ask for an exception from registration if, despite reaching the AED 375,000 threshold, you do not make any further taxable supplies.
However, the majority of businesses based in the UAE with turnover above the registration threshold will be required to register for VAT.
In addition, businesses with a lower turnover can choose to register for VAT voluntarily. The minimum threshold for this is AED 187,500 in taxable supplies.
Taxable supplies are the sales of goods or products on which VAT must be charged, at either the standard rate (5%) or the zero rate (0%). To calculate the value of taxable supplies, include imports that, although not taxable in themselves, would be taxable if supplied within the UAE.
Late registration for VAT means a penalty of AED 20,000.
Where to register for VAT
Before you register for VAT you must set up an e-Services account on the Federal Tax Authority (FTA) website.
The steps for this are:
- Add your email and a unique password.
- Add a security question and a hint.
- Verify your account creation via email, within 24 hours.
The FTA e-Services system allows an account administrator to manage multiple tax accounts.
The VAT registration process
Having set up an e-Services account, you will, on logging in, be presented with a Register for VAT. button. Pressing this initiates an eight-step process. Each step has mandatory elements, and these must be completed before you can move on to the next step.
You can save your progress, by choosing the Save as a draft. option. This is recommended, as the system will log you out after just ten minutes of inactivity. You want to avoid the risk of losing information, should you be distracted during registration.
Having completed the application you should submit it for approval. When approval is granted you will be assigned a Tax Identification Number (TIN).
Information required during the registration process includes:
- The type of person operating the business (either a 'natural person' or a 'legal person')
- Whether it's a mandatory or voluntary registration
- Whether you are applying to or creating a Tax group
- Legal and trade name of the person
- Certificate of incorporation
- Contact and bank details
- Details of business activities
- Turnover in the last 12 months
- Expected expenses for the last 12 months
- Information on imports and exports
This is only a summary of the details that will be required during the registration process.
Where VAT registration is not required
Your business is not required to register for VAT if:
- Turnover is below AED 375,000 over 12 months
- All your supplies are exempt
- You have applied for and been granted an exception from registration
It's important to note the difference between exempt and zero-rated supplies.
A zero-rated supply is different from an exempt supply, although VAT is not charged on either of them. A business that provides zero-rated supplies must apply the AED 375,000 threshold and register if taxable turnover exceeds this.
Where businesses make supplies that are a mix of taxable and exempt, or a mix of standard VAT and zero-rated VAT, or indeed, a mix of all three, they must carefully calculate their position regarding the VAT registration threshold.
Implications of VAT registration
The advantage of being registered for VAT is that you can recover VAT on any costs your business has incurred. This is because VAT is a value-added tax, meaning it's only a tax on the benefit to the consumer. Your role as a business is to collect this tax on behalf of the government, and you can offset what you collect against what you've paid in tax on purchases.
You must maintain detailed accounting records of all income and costs and the associated VAT. This detailed bookkeeping helps ensure that your VAT reporting is as accurate as possible.
You will be required to report on the VAT charged and recovered on a regular basis, using VAT returns.
Get help with your VAT registration
We provide a service that assists UAE businesses with the VAT registration process and their ongoing VAT accounting and reporting.
Depending on the nature of your business, VAT can be a complex tax to administer. Our specialists have a detailed knowledge of VAT regulations and processes and can advise and guide you on all aspects of this important tax.
We are also experts at setting up and operating Xero accounting software for VAT.
If you're uncertain about any aspect of VAT about your business, or you would like advice on whether and how to register for VAT in the UAE, get in touch with us today.