VAT Registration in Dubai
Value Added Tax (VAT) is a tax system that businesses in the UAE must follow to meet tax requirements. VAT Registration in Dubai is a process that businesses in the UAE must go through to comply with tax laws. This tax system was introduced in the UAE on January 1, 2018, as a way for the government to collect taxes on goods and services.
Registering for VAT is important for businesses because it allows them to legally operate and sell their products or services in the UAE. When a business is registered for VAT, it means they can charge VAT on their sales and then pay that collected VAT to the government.
VAT Registration
Value Added Tax (VAT) was introduced in the UAE in 2018 as a consumption tax levied on the value added to goods and services at each stage of the supply chain. VAT registration is an important step for businesses operating in the UAE to comply with tax regulations.
VAT registration is like signing up officially with the government to join a tax system called Value Added Tax (VAT). The main goal of VAT registration is to help businesses collect and pay the right amount of VAT on the things they sell, which is important to follow the tax rules and support the government with tax money.
There are two types of VAT Registration:
Mandatory VAT Registration: This is when businesses must register for VAT because they meet certain rules set by the government. For instance, in the UAE, if a business's sales and imports are more than AED 375,000 in a year, within the past 12 months or expecting to exceed it in the next 12 months they must register for VAT. This ensures that bigger businesses pay their fair share of taxes.
Voluntary VAT Registration: Businesses with taxable supplies exceeding AED 187,500 but not exceeding AED 375,000 in the preceding 12 months or anticipated to exceed AED 375,000 in the next 12 months can choose to register voluntarily. Some businesses can choose to register for VAT even if they don't have to by law. They might do this to get back some of the VAT they paid on things they bought for their business or to show they are reliable in business. But once they register voluntarily, they have to follow all the VAT rules just like mandatory registrations.
The main difference between these two types is that mandatory registration is a must based on rules, while voluntary registration is a choice businesses can make for some benefits or to show they are responsible for handling taxes.
Who Should Register for VAT in UAE
VAT Registration is required for businesses to:
- Comply with tax laws and avoid penalties
- Claim input tax credits
- Avoid additional costs on goods and services
- Improve business credibility and reputation
- Expand business opportunities and competitiveness
VAT Registration Eligibility
Local businesses and international corporations operating in the UAE must register for VAT within 30 days of their taxable supplies and imports exceeding the mandatory registration threshold of AED 375,000. Enterprises that do not meet the required limit can still register voluntarily.
The following businesses or individuals should register under VAT in UAE:
Mandatory Registration:
- Businesses with an annual taxable supply exceeding AED 375,000.
- Businesses that expect to exceed the AED 375,000 threshold in the next 30 days.
- Businesses involved in the supply of goods and services are subject to VAT, regardless of turnover.
Voluntary Registration:
- Businesses with an annual taxable supply below AED 375,000.
- Businesses making zero-rated supplies (e.g., exports).
- Businesses wanting to claim VAT refunds.
- Businesses seeking to improve their credibility and reputation.
Other Eligible Persons:
- Nonresident businesses making taxable supplies in the UAE.
- Businesses providing services related to real estate, including renting or leasing.
- Businesses involved in the supply of goods and services are subject to VAT, even if the turnover is below the threshold.
To be eligible for VAT Registration in Dubai, businesses must:
- Be a legal entity (individual, company, partnership, etc.).
- Carry out economic activities (business, trade, profession, etc.).
- Make taxable supplies (goods and services subject to VAT).
Eligibility Criteria for VAT Registration in Dubai
Benefits of Voluntary Registration
Businesses that sign up voluntarily can get back some of the VAT they paid on things they bought for their business, which can help reduce the total VAT they owe. Voluntary registration also shows that a business is following tax rules and can make it look good to customers and partners.
If a business makes a lot of sales or brings in a lot of stuff, they have to join VAT. If they choose to join even though they don't have to, they can get back some of the tax they paid on their purchases and look good in the eyes of others.
VAT Turnover Calculation for Registration in UAE
To calculate the VAT turnover for Registration in UAE, follow these steps:
Identify taxable supplies: Include all goods and services subject to VAT at the standard rate (5%) or zero rate (0%).
Calculate the value of taxable supplies:
- For goods: the value of goods sold + customs duty + excise tax (if applicable)
- For services: value of services provided
Include exempt supplies: Add the value of exempt goods and services (e.g., financial services, healthcare, education)
Add the value of imported goods: Include the customs duty and excise tax (if applicable)
Example:
- Taxable goods sold: AED 1,000,000
- Customs duty: AED 50,000
- Excise tax: AED 20,000
- Taxable services provided: AED 500,000
- Exempt goods sold: AED 200,000
- Imported goods (customs duty and excise tax): AED 30,000
Total VAT turnover: AED 1,800,000 (AED 1,000,000 + AED 50,000 + AED 20,000 + AED 500,000 + AED 200,000 + AED 30,000)
If the total VAT turnover exceeds AED 375,000, the business must register for VAT.
- Incomplete Documents: Before you start your registration, make sure you have all the necessary documents ready.
- To Register Late: Register on time to avoid penalties and interest charges.
- Incorrect Threshold Calculation: Check your annual income carefully to see if VAT registration is mandatory.
- Misunderstanding of VAT Rates: Understand the different VAT rates that apply to your products and services.
- Poor Record Keeping: Keep accurate and detailed records of all transactions.
- Ignore Tax Points: time management to ensure accurate VAT calculations.
- Don’t Seek Professional Advice: Contact a tax advisor for guidance on complex VAT rules.
- Reverse Charge Mechanism Overview: If applicable, understand and use the reverse charge mechanism.
VAT Declaration Letter
A VAT declaration letter is a document that confirms a business's VAT registration status and details its VAT obligations. It is typically issued by the Federal Tax Authority (FTA) in the UAE and includes the following information:
- Business details: Name, address, and TRN (Tax Registration Number)
- VAT registration status: Confirms whether the business is registered for VAT or not VAT registration number:
- VAT registration number: Provides the unique VAT registration number assigned to the business
- Effective date of registration: Specifies the date from which the business is required to charge VAT
- VAT obligations: Outlines the business's obligations, such as filing VAT returns, paying VAT due, and maintaining VAT records
- VAT exemption: Indicates if the business is exempt from VAT or not
- Signature and stamp: Authorized signature and stamp of the FTA
The VAT declaration letter is an important document that businesses must keep as proof of their VAT registration and compliance with VAT regulations in the UAE. It may be required to be submitted to banks, government entities, or other businesses for various purposes.
Required Documents for UAE VAT Registration
- Trade License: This shows that the business is allowed to operate in the UAE.
- Emirates ID and Passport Copy: These prove who you are and that you can register the business.
- Financial Statements: These show how the business is doing financially.
- Bank Account Details: This is where VAT-related money goes in and out.
- VAT Registration Form: This is like a request to join the VAT system.
- Proof of Business Activities: These show what the business does and if it involves VAT.
- Customs Registration Number (if needed): This is for businesses that import or export goods.
The FTA may request additional documents or information to support the VAT registration application. It's important to make sure that all documents are valid, accurate, and complete to avoid any delays or rejection of the VAT registration application.
For Taxable Supplies:
- Audit report (audited or non-audited financial statement).
- Self-prepared calculation sheet based on financial records to calculate taxable/zero-rated supplies.
- Revenue projection supported by documentation (such as a contract or local purchase order).
- On the organization's letterhead, the authorized signatory signs and stamps the monthly turnover statement.
- Supporting financial documents (e.g., invoices, contracts, title deeds, tenancy contracts).
For Taxable Expenses:
- Audit report (audited or non-audited financial statement).
- Expense budget report.
Additional Documents:
- Articles of Association/Partnership Agreement (if applicable).
- Certificate of Incorporation (if applicable for Legal Person).
- Ownership information documents.
- Customs details (if applicable).
- Power of Attorney documents (if applicable).
- Club, charity, or association registration documents (if applicable).
- Copy of the Decree (if applicable).
- Other relevant documents provide information about your organization, activities, and size.
Here are the forms you might need to fill out and submit with your online application:
- Turnover Declaration Template for Taxable Supplies
- Turnover Declaration Template for Taxable Expenses
- Turnover Declaration Letter Form
These documents are needed to make sure the business is real, financially stable, and does things that involve VAT. It is important to be honest and obey the laws when it comes to taxes.
VAT Registration Requirements in Dubai
Login to EmaraTax Portal:
- Visit the Federal Tax Authority (FTA) website.
- To access your EmaraTax account, enter your login credentials or use your UAE Pass. If you don't already have an account, click'sign up' to create one.
- After signing in, the EmaraTax online user dashboard will appear.
Create a Taxable Person:
- Following a successful login, the Taxable Person list screen opens.
- If no Taxable Person is linked to your profile, enter the mandatory details and click 'Create'.
- To access the dashboard, choose the Taxable Person you created from the list and click 'View'.
Initiate VAT Registration:
- To start the VAT registration application, click 'Register' on the VAT tile on the Taxable Person dashboard.
Read Guidelines and Instructions:
- A screen containing VAT registration rules and instructions will be displayed. Read the instructions and mark the checkbox to indicate your comprehension.
- Read the guidelines and mark the checkbox to confirm understanding.
Complete Entity Details Section:
- Select the Entity Type of your business from the list.
- Fill out the required fields and then click 'Next Step' to proceed.
Provide Identification Details:
- Depending on the Entity Type, provide the principal trade license information in the identifying details box.
- Enter all required business activity information by clicking 'Add Business Activities'.
Enter Owner and Branch Details:
- Click the 'Add Owners' button to add all owners linked with the trade license.
- If relevant, provide local branch details, such as trade licensing information, connected business operations, and an owner listing.
Eligibility Details:
- Enter taxable supplies and costs manually or submit them using the given Excel template.
- Based on the information supplied, determine if you are eligible for VAT registration.
Fill in Contact and Business Relationships Details:
- Enter the registered address details of the business.
- Provide information on the Manager or CEO, as well as any extra relationship facts that may be essential.
Bank Details (Optional):
- Entering bank information is optional at the registration step, although it is recommended to minimize delays during refund processing.
Additional Details and Customs Information:
- If you're importing items from GCC member nations, include GCC Business activity.
- If you are registered with any of the UAE Customs Authorities, enter your customs registration information.
Authorized Signatory and Review:
- Provide information about the authorized signatory for the VAT registration application.
- Review all the entered details and complete the declaration.
Submit Application:
- After completing all parts, submit your VAT registration application to the FTA for assessment.
Post Application Submission:
- Check the status of your application via the EmaraTax site.
- Respond to any correspondence and additional information requests from the FTA.
Following these steps ensures a complete and accurate
VAT Group Registration
VAT Group Registration is a process that allows multiple businesses to register as a single entity for VAT purposes. This can simplify VAT compliance and reduce administrative burdens for related businesses.
To register for VAT as a group, the following conditions must be met:
1. The businesses must be related, meaning they are:
- Parent and subsidiary companies
- Subsidiaries of the same parent company
- Companies under common control or management
2. The businesses must be residents of the UAE
3. The businesses must have a minimum annual turnover of AED 375,000
The VAT group registration process involves:
- Identifying the group members and their relationships
- Appointing a representative member to act on behalf of the group
- Submitting the VAT group registration application through EmaraTax
4. Providing required documents, including:
- Business registration certificates
- Trade licenses
- Proof of business address
- Bank account details
5. Obtaining approval from the Federal Tax Authority (FTA)
Benefits of VAT group registration include:
- Simplified VAT compliance
- Reduced administrative burdens
- Single VAT registration and return
- Improved cash flow management
VAT group registration is subject to FTA approval and may require additional documentation or information. It's recommended to consult a tax professional or the FTA for guidance on the registration process.
A VAT Registration Certificate is a document issued by the Federal Tax Authority (FTA) in the UAE, confirming a business's registration for Value-Added Tax (VAT). A VAT Registration certificate, also known as a VAT Registration Letter, is a document that contains the following details:
- Business name and address
- VAT registration number (VRN)
- Effective date of VAT registration
- Business activity
- VAT registration type (e.g., standard, zero-rated, exempt)
- FTA's logo and signature
The VAT Registration Letter is issued within 10 working days after the FTA approves the VAT registration application. It serves as proof of a business's VAT registration and is required for various purposes, such as:
- Opening a VAT account with a bank
- Issuing VAT invoices
- Claiming VAT refunds
- Complying with VAT audits and inspections
- Updating business records and licenses
The VAT Registration Certificate is an important document that businesses must keep safely, as it confirms their VAT registration status and is required for various VAT-related transactions.
In the UAE, the following terms are interchangeable and refer to the same thing:
- VAT Number
- TRN Number (Tax Registration Number)
- VAT Tax Number
- VAT Identification Number
- VAT Registration Number
This number is a unique 15-digit identifier assigned to a business by the Federal Tax Authority (FTA) upon successful VAT registration. It is used to identify the business for VAT purposes and is required on VAT invoices, returns, and other VAT-related documents.
The format of the TRN/VAT Number in the UAE is as follows:
123456789012345
It consists of:
- The first three digits (123) represent the tax authority (FTA)
- The next nine digits (456789012) represent the unique identifier for the business
- The last three digits (345) represent the check digits (calculated based on the previous nine digits)
Businesses must display their TRN/VAT Number on all VAT-related documents, including invoices, receipts, and credit notes, to validate their VAT registration and comply with UAE VAT regulations.
VAT Registration Process for UAE Non-Residents
Non-residents can register for VAT in the UAE under these conditions. Here's an explanation of the process and requirements for VAT registration for non-residents:
Eligibility
Non-residents can register for VAT in the UAE if they meet the following criteria:
- They have a business or economic activity in the UAE that involves taxable supplies.
- They do not have a place of residence or fixed establishment in the UAE
Requirements for Non-Resident Registration
- Tax Agent: Non-resident businesses must appoint a tax agent who is authorized to act on their behalf regarding VAT matters in the UAE.
- Tax Identification Number (TIN): Non-resident businesses must obtain a Tax Identification Number (TIN) from the Federal Tax Authority (FTA) in the UAE.
- VAT Registration Application: Non-resident businesses need to submit a VAT registration application to the FTA through their appointed tax agent.
Procedures for Non-Resident Registration
- Appointment of Tax Agent: The non-resident business appoints a tax agent who will handle all VAT-related tasks on their behalf, including registration, filing returns, and communication with tax authorities.
- TIN Application: The tax agent applies for a Tax Identification Number (TIN) for the non-resident business from the FTA.
- VAT Registration Application: The tax agent submits the VAT registration application to the FTA on behalf of the non-resident business. The application includes necessary documents such as proof of business activities in the UAE and the appointment of the tax agent.
Verification and Approval
Once the VAT registration application is submitted, the FTA verifies the information provided and may conduct further checks if needed. If everything meets the requirements, the FTA approves the VAT registration for the non-resident business.
Ongoing Compliance
After registration, non-resident businesses must comply with all VAT regulations in the UAE, including filing VAT returns, maintaining proper records, and adhering to tax deadlines. Their appointed tax agent assists them in fulfilling these obligations.
Non-residents can register for VAT in the UAE if they have a business activity in the country and meet specific requirements. They must appoint a tax agent, obtain a Tax Identification Number (TIN), and submit a VAT registration application through their tax agent to the Federal Tax Authority (FTA) in the UAE.
How to be Compliant after VAT Registration
To be compliant after VAT registration in UAE, follow these steps:
- Charge VAT: Apply VAT to all taxable goods and services at the applicable rate (5% or 0%).
- Issue VAT invoices: Create and issue VAT-compliant invoices, including your TRN, VAT amount, and other required details.
- File VAT returns: Submit VAT returns to the FTA within the specified timeframe (usually every quarter).
- Pay VAT dues: Pay VAT amounts to the FTA by the deadline to avoid penalties.
- Maintain records: Keep correct and detailed records of all VAT-related transactions, invoices, and payments.
- Display TRN: Show your TRN on all invoices, receipts, and business documents.
- Update accounting systems: Make sure your accounting software and systems are VAT-compliant.
- Train staff: Educate employees on VAT rules and procedures.
- Comply with FTA requirements: Follow FTA guidelines and regulations.
Timeframe for VAT Registration
- The time it takes to process a VAT registration application in the UAE can change based on different things. These include how well the application is filled out, how busy the tax office is, and if they need more details.
- First, you submit your VAT registration form and all the needed documents to the tax authority through your tax agent. Things get started.
- Then, the tax authority looks at your application to make sure everything is there and correct.
- If they need more info, they might ask you or your tax agent for it. This can be about what your business does or your finances.
- If everything is good and they have all they need, they approve your VAT registration.
- Once approved, they give you a special tax number you need for VAT transactions.
The deadlines for UAE VAT registration are as follows :
Once a business's taxable supplies or imports exceed the mandatory registration threshold of AED 375,000, it must register for VAT within 30 days. Failure to register within this time frame will result in substantial penalties.
VAT exemption in the UAE
In the UAE, the following goods and services are exempt from VAT:
- Healthcare services: Medical treatments, doctor fees, and hospital charges.
- Education services: Tuition fees, educational institutions, and related services.
- Real estate transactions: Sales and leases of residential property (excluding commercial property).
- Local passenger transport: Taxi services, bus fares, and metro fees.
- Certain food items: Basic food staples like rice, bread, milk, and meat (excluding luxury or processed foods).
- Certain healthcare goods: Medicines, medical equipment, and related products.
- Charitable activities: Donations, charity work, and related services.
- Religious services: Mosque, church, and temple services (excluding religious books and accessories).
- Government services: Public services like municipality fees, parking fees, and government agency fees.
- Financial services: Bank interest, loans, and related financial services (excluding insurance and reinsurance).
Not signing up for VAT when you have to can lead to problems in the UAE. like,
Money Fines: You might have to pay fines if you don't register for VAT like you're supposed to. These fines can change based on how long you wait and how serious the problem is.
Legal Trouble: The tax office can take legal action against you for not registering. This could mean warnings or even going to court if you keep doing business without VAT registration when you're supposed to have it.
Inability to Conduct Business: If you don't register, the tax office might stop you from doing certain business activities. For example, you might not be able to give out tax invoices or get government contracts until you follow the VAT rules.
Tax Liability: Not signing up for VAT doesn't mean you don't have to pay taxes. You might still owe VAT on things you sell, and not paying can lead to more fines and interest on the overdue taxes.
Bad Reputation: Not following tax rules can make your business look bad. It might scare off customers, suppliers, and partners who want to work with businesses that play by the rules.
The penalty for non-registration under UAE VAT is as follows:
Voluntary disclosure:
- 5% of the tax amount payable, if the registration is done within 30 days from the date of notification
- 10% of the tax amount payable, if the registration is done between 31 days to 60 days from the date of notification
- 20% of the tax amount payable, if the registration is done after 60 days from the date of notification
Mandatory disclosure:
- 50% of the tax amount payable, if the FTA notifies the taxpayer of their obligation to register
Failure to register:
Failure to submit VAT returns or pay VAT due:
Note: The penalties can be waived or reduced if the taxpayer can provide a reasonable excuse for non-registration or late registration.
It is important to note that the FTA may also impose penalties for other VAT-related offenses, such as:
- Failure to maintain proper records
- Failure to issue tax invoices
- Failure to pay VAT due
- Making tax evasion or fraud
How do we maintain compliance post-registration in Dubai?
To comply with post-VAT registration in Dubai, businesses can adhere to the following best practices:
- Charge VAT as needed: You have to charge VAT on your taxable supplies if your company is VAT-registered. This entails raising your sales price by the standard VAT rate, which is currently 5%, and making sure that your invoices prominently display this amount.
- Maintain thorough records: You must keep thorough records of your company's revenue, expenses, and related VAT charges. These documents are necessary to complete your VAT returns and assist you in determining your VAT liability. The FTA advises preserving these documents for at least five years.
- Returns must be filed on time: The Federal Tax Authority (FTA) requires that you file your VAT returns on time. Your VAT charges and deductions for a given tax period are summarized in these returns.
- Issue VAT Invoices: For all taxable supplies, you must issue VAT invoices. Your Tax Registration Number (TRN), a unique identification number, the date of issue, and other information must be included on these invoices.
- Adhere to FTA regulations: You must adhere to all FTA regulations. This includes requirements for invoice formatting, maintaining records, and VAT return submission.
Managing VAT Returns
Value Added Tax (VAT) is imposed on the provision of products and offerings as a consumption tax. Managing VAT returns efficaciously is vital for organizations to maintain compliance and keep away from consequences.To assist you in navigating the manner, beneath is a brief manual:
Key Steps in Managing VAT Returns
Record Keeping:
- Accurate Records: Maintain correct sales, purchases, and fees statistics.
- Detailed Invoices: Issue targeted invoices for all sales.
- Supplier Invoices: Collect invoices from suppliers.
Calculating VAT:
- Output VAT: Calculate the VAT charged to your income.
- Input VAT: Calculate the VAT paid for your purchases.
- Net VAT: Determine the internet VAT payable or refundable (output VAT - enter VAT).
Filing the VAT Return:
- Online Filing: Use the tax authority's online portal to file your return.
- Deadline Adherence: Submit your go back earlier than the closing date.
- Accurate Information: Ensure all records are accurate and whole.
Payment of VAT:
- Timely Payment: Pay the internet VAT because of the tax authority.
- Payment Methods: Use the legal fee techniques.
Record Retention:
- Legal Requirements: Retain records for an exact length.
- Easy Access: Store records in a prepared manner for easy retrieval.
If your business does not meet the UAE VAT registration criteria, you'll be eligible for VAT deregistration. Here’s a short assessment of the system:
- Eligibility for Deregistration: VAT deregistration applies if your taxable components fall under the deregistration threshold (presently AED 187,500) or in case you end buying and selling totally.
- Submitting a Deregistration Application: Log into your Federal Tax Authority (FTA) portal account and whole the VAT deregistration shape. This must be done within 20 commercial enterprise days of turning into eligible to keep away from fines.
- Final VAT Return: Prepare and put up your very last VAT go back, making sure all tax liabilities are settled, such as any pending VAT payments.
- Approval and Confirmation: After reviewing your utility, the FTA will system the deregistration and affirm once all criteria are met.
Optimize compliance with our Tax/VAT Health Checkup Services.
Why Choose Reyson Badger
Choosing Reyson Badger to help with your VAT registration means you get expert advice for dealing with the UAE's VAT rules. Reyson Badger's role is important in making sure your VAT registration goes smoothly and follows all the rules. We guide you through the process, make sure you have all the right documents, and help you avoid mistakes that could cause problems later.
Note: Here are the main things to know about VAT registration in the UAE: You have to register if your business meets certain criteria, it's important to fill out the forms correctly, and not registering can lead to fines and other issues. To get the best advice for your situation, it's a good idea to talk to a tax advisor like Reyson Badger. We can give you personalized help and make sure you're following all the rules correctly.
FAQs on VAT Registration in Dubai
1. How do companies in Dubai submit VAT Registration?
VAT Registration in Dubai is available on the FTA's official online portal, which guides users through the registration process step by step.
2. What are the fines if fails to VAT Registration in Duba within the deadline?
If one fails to register for VAT in Dubai before the deadline, the fines can be as high as AED 20,000 according to FTA rules.
3. Can small businesses apply for VAT Registration in Dubai?
Yes, Small businesses with a taxable turnover of between AED 187,500 and AED 375,000 can optionally apply for VAT registration in Dubai.
4. Do free zone companies need to file for VAT Registration in Dubai?
Yes, those free zone companies that make taxable supplies have to file for VAT registration in Dubai if their turnover exceeds the threshold.
5. How long does it take to complete the VAT registration in Dubai?
The process normally takes 20 business days, provided all required documents and information are submitted accurately.
