How to Determine VAT Registration Threshold in the UAE?
Who Should Opt for VAT registration in UAE?
When business conduct trade in the UAE, one important question asked is “Do you have a TRN?”. This looks very common and simple but for new businesses, it creates many confusions. The same becomes a problem when your customer or supplier says, we do not conduct trade unless you have a Tax Registration Number (TRN).
Similarly, when business is conducted by individuals, there is often confusion that VAT registration in UAE is for businesses and not for individuals. There are many other similar doubts or scenarios where VAT registration in UAE brings confusion in your mind. How would one understand, who should opt for VAT registration in UAE?
We are trying to explain to you who must register for VAT in UAE. If referring to the statement in the UAE VAT Law, we can say that every person who has a Place of Residence in the UAE or Implementing state and whose value of taxable supplies in 12 months exceeds or is expected to exceed the mandatory registration threshold has to register as per the UAE VAT Law.
We can understand it as a UAE resident person should get VAT registration if his taxable turnover (sales or services) exceeds the VAT registration threshold. At this point, we would like to clear that VAT registration in UAE is applicable for businesses and individuals if the VAT registration threshold is met.
To explain further, we need to understand the term taxable supplies as per UAE VAT Law as all sales or services are not considered as taxable under UAE VAT Law. It means only those supplies which have a place of supply in UAE and are not considered as exempt supplies in UAE VAT Law, will be considered as a taxable supply for the purpose of VAT in UAE. Similarly, those supplies having a place of supply outside UAE are considered as outside the scope of UAE VAT and will not be included in the VAT registration threshold calculation. For example: if the movement of goods is from China to the USA without reaching into UAE (direct shipment) but the transaction is invoiced from UAE, this supply will be considered as out of scope for UAE VAT as the goods have not physically come to UAE (place of supply rule – outside UAE).
So as explained above only those who are residents in UAE or Implementing state, whose taxable turnover in the previous 12-month period or in the next 30 days exceeds the VAT registration threshold need to get registered in UAE. Such a person who is required to register for VAT must file a Tax Registration application to the Federal Tax Authority (FTA) within (30) days of being required to register. The VAT registration threshold mentioned as per UAE VAT Law is:
- Mandatory registration threshold is AED 375,000
- Voluntary registration threshold is AED 187,500
The above mentioned taxable turnover limits apply for residents in the state and not for persons residing outside the implementing state. For the non- residents or person outside implementing state, VAT registration in UAE is mandatory if they make any taxable supply in UAE for which no other person is responsible to account VAT in UAE. Hence for example; an individual or a company from Italy makes a taxable supply in UAE (service is provided in UAE) to an individual/company resident in UAE who is not registered for UAE VAT, then the non-resident needs to get registered for VAT in UAE.
Whether a natural person is required to register for VAT?
Yes. A natural person or legal person is required to register for VAT if his taxable supplies exceed the mandatory registration threshold of AED 375,000/- over the previous 12 months or are expected to exceed in the coming 30 days. If the registration is not done within the time -period, it can attract penalties for late registration as well as late filing of the VAT Returns.
VAT Registration Turnover Calculation or How To Determine VAT Registration Threshold in the UAE?
In Order to arrive at the VAT Registration threshold, we need to consider the following taxable supplies.
Taxable Supplies’ include:
- Standard rated supplies
- Zero-rated supplies
- Reverse charge supplies
- Import of goods.
As explained before the value of exempted supplies will not be considered for computing the taxable supplies.
What are the VAT Registration requirements?
Before filling the VAT Registration Form you need to consider the following:
- Are you mandatorily required to register for VAT or are you registering voluntarily?
- For legal persons: Are you applying for a single VAT registration or for registration as a VAT Group?
Once you have decided the above you need to prepare the information and supporting documents required to furnish during the VAT registration. We have listed down such information’s or documents required during VAT registration.
- Trade license copy
- Certificate of incorporation
- Article of Association/Partnership agreement/ similar document that shows ownership information of business
- Copy of valid passport and Emirates ID of the manager and authorized signatory.
- Company contact details namely, Building name & No., Street, Area, City, PO Box No., Emirate, Country, Phone number with country code.
- UAE Bank account details namely, Account Holder Name, Bank name, Branch location, Account holder name, IBAN number, BIC
- Turnover for the last 12 months, expected turn over in the next 30 days, vatable expenses for the last 12 month, Expected expense in the next 30 days
- Details of Customs registration Number, and its supporting documents (if applicable)
- Proof of authorization (power of attorney/ board resolution/ Memorandum of Association)
- Financial proof like sales or purchase invoices signed and stamped
How to register for VAT in UAE?
- Visit the website of FTA
- Then select e-services, through which VAT registration application can be made.
- Sign up using the email ID and register the business
- VAT registration application form can be accessed and provide all required information and documents.
- Submit the application as per the guidance provided in the form.
Once the application is submitted, the Federal Tax Authority (FTA) will review the application and may approve the application if all the condition for VAT registration is met. FTA may take up to 20 working days to review the application. If the application is approved, then the Tax Registration Number (TRN) will be issued to the taxable person. The taxable person shall comply with all other requirements of UAE VAT Law including accounting the transactions, maintaining records like tax invoices, submitting VAT returns etc..
Whether there is any penalty if there is a delay in filing the VAT Registration in UAE?
If you fail to register within the time frame, then the administrative penalty of AED 20,000/- according to the cabinet Resolution no (40) of 2017 on administrative penalties for violation of tax laws in the UAE will be levied.
Emirates Chartered Accountants Group is a Registered Tax Agent with the Federal Tax Authority under Emirates International Chartered Accountants Group. Our Tax Professionals are highly qualified and well versed with the UAE Tax Law with the practical implementation of VAT in UAE and Bahrain.
|For Tax Services in Dubai:
Mr. Pradeep Sai
+971 – 556530001
|For Tax Services in Abu Dhabi:
+971 – 558892750
|For Tax Services in Northern Emirate (Sharjah, Ajman, RAK, Fujairah)
+971 – 508873115