Top Mistakes to Avoid While Registering VAT in Dubai

Written By Akshaya Ashok, Reviewed By Nouphal P C

Published on 06/12/2024

VAT registration is an important process for businesses in Dubai and the rest of the UAE. VAT compliance is mandatory for all companies with annual turnovers that cross certain thresholds. So, avoiding errors during this registration is very crucial to avoid penalties and other legal issues or holds. Here's a guide to the top mistakes businesses often make during VAT registration and how to avoid them. 

1. Incorrect Estimation of Turnover

• Mistake: Businesses fail to correctly estimate their taxable turnover, leading to premature or delayed registration.
• Solution: Maintain accurate financial records and ensure your turnover meets the mandatory registration threshold of AED 375,000 for taxable supplies before applying.

2. Filing Incomplete or Incorrect Documents

• Mistake: Filing defective or incomplete/incorrect documentation such as unmatched trade license details or improper financial records.
• Solution: Check all documents submitted for inclusion, such as trade licenses, financial statements, and Emirates ID copies. Ensure that the information given is correct.

3. Selecting the Wrong Registration Type

• Mistake: Selecting the wrong category under VAT registration, such as voluntary instead of mandatory registration.
• Solution: Understand whether your business qualifies for mandatory registration or if voluntary registration is more suitable based on your turnover and taxable supplies.

4. Incorrect Business Activity Declaration

• Mistake:  Claiming a wrong or irrelevant business activity that does not align with your trade license.
• Solution: Ensure that the business activity as declared in your trade license matches the business activity listed on the license to avoid discrepancies.

5. Ignoring the Reverse Charge Mechanism

• Mistake: Failure to account for the reverse charge mechanism on imported goods and services during VAT registration.
• Solution: If your business with suppliers is sourced internationally, understand and include the reverse charge mechanism in your registration process.

6. Delaying VAT Registration

• Mistake: missing the deadline to register for mandatory VAT and, as a result, facing AED 20,000 in fines.
• Solution: Keep track of your taxable turnover and register for VAT well before crossing the mandatory threshold.

7. Lack of Professional Guidance

• Mistake:  Trying to navigate the complex VAT registration without professional assistance.
• Solution: Work with VAT consultants or professional service providers to simplify registration and ensure compliance.

8. Incorrect Bank Details

• Mistake: Providing inaccurate or incomplete bank account information during registration.
• Solution: Recheck the bank account details to ensure they match your records in the trade license and other papers.    

9. Not Updating Business Information

• Mistake: Businesses fail to update changes in their business structure or contact details after registration.
• Solution: Notify the FTA if any significant change occurs, and this ensures your VAT record is updated accordingly.

10. Misunderstanding Exemptions and Zero-Rated Supplies

• Mistake:  Exempt and zero-rated supplies are confused, leading to mistaken VAT calculations and filings.
• Solution: Familiarize yourself with the VAT categories relevant to your business, and consult the expert to seek clarity.

Conclusion

Avoiding these common mistakes during VAT registration in Dubai is crucial for ensuring compliance and minimizing legal and financial risks. Businesses must approach the VAT registration process with accuracy, preparedness, and a clear understanding of regulations.

Need Help with VAT Registration?

Reyson Badger offers expert VAT registration services in Dubai, ensuring a hassle-free and compliant registration process for your business. Reach out to us today for personalized guidance and assistance!

Written By

Akshaya Ashok

Akshaya Ashok is a content writer specializing in creating content focused on accounting and auditing. With over two years of experience, she has developed expertise in crafting professional content for the financial sector.