VAT Consultants in UAE a Case Study on VAT Registration in UAE
VAT Consultants in UAE
As registered VAT Consultants in UAE, we are engaged with more than hundreds of happy customers providing VAT Services all over the UAE. In this case study, as VAT Consultants in UAE with our practical knowledge, we will learn the practical scenarios about VAT Registration in the UAE, we will discuss the requirements, application, and provisions of UAE VAT Law.
VAT Registration in the UAE is mandatory for taxable businesses since the inception of VAT in UAE from 1st January 2018. The Federal Tax Authority (FTA) invites taxable businesses for VAT Registration in the UAE which is an online process.
Case Study: As a VAT Consultant in UAE, for KKT LLC a company operating from UAE mainland is engaged in the trading of goods. The company is making supplies to the customers in the UAE as well as overseas.
As on 15th December 2019, the supplies over the last 12-month is as follows.
|Sl. No.||Nature of Supplies||Turnover in AED|
|1||Standard Rated Supplies in UAE||305,000/-|
|3||Import of goods from outside||100,000/-|
|4||Exports of goods||150,000/-|
As a VAT Consultant in UAE, for KKT LLC we had to determine the below requirements:
- Whether KKT LLC is required to register for UAE VAT?
- Suppose if the turnover of KKT LLC for the last 12 months is as follows.
- Standard Rated Supplies in UAE- AED 85,000/-
- Import of goods from outside AED 55,000/-
- Exports of goods AED 50,000/-
Whether KKT LLC is required to register for UAE VAT?
- If KKT LLC is making only zero-rated supplies of AED 400,000/- for the last 12 months whether it is required to get registered for VAT?
As their VAT Consultant in Dubai, UAE, we shall identify the applicable provisions of the UAE VAT Law related to the transaction and understand the eligibility criteria for VAT Registration in the UAE.
Applicable provisions of the UAE VAT Law
As per Article 13(1) of the Federal Decree-Law the Mandatory Tax Registration for every Person, who has a Place of Residence in the State or an Implementing State and is not already registered for Tax, shall register in the following situations:
- a Where the total value of all supplies referred to in Article (19) exceeded the Mandatory Registration Threshold over the previous 12-month period.
- Where it is anticipated that the total value of all supplies referred to in Article (19) will exceed the Mandatory Registration Threshold in the next thirty (30) days.
As per Article (7) of the Executive regulation, the Mandatory Registration Threshold shall be AED 375,000
As per Article (15) Registration Exceptions it says that the Authority may except a Taxable Person from mandatory Tax Registration upon his request if his supplies are only subject to the zero rates.
As per Article (17), Voluntary Registration any Person who is not obligated to apply for Tax Registration according to this Chapter may apply for Tax Registration in the following cases:
- If he proves, at the end of any given month, that the total value of supplies referred to in Article (19) of this Decree-Law or the expenses which are subject to Tax and were incurred during the previous 12-month period, has exceeded the Voluntary Registration Threshold.
- At any time that he anticipates that the total value of supplies stipulated in Article (19) of this Decree-Law or the expenses which are subject to tax that will be incurred, will exceed the Voluntary Registration Threshold during the coming 30-day period.
According to Article (8) of the Executive Regulation, the Voluntary Registration Threshold shall be AED 187,500/-.
As per Article (19) to determine whether a person has exceeded the Mandatory Registration Threshold and the Voluntary Registration Threshold, the following shall be calculated:
- The value of Taxable Goods and Services.
- The value of Concerned Goods and Concerned Services received by the Person unless covered by Clause (1) of this Article.
Applicability of the provisions of the UAE VAT Law in the current scenario for VAT Registration in the UAE
It is very clear from the Article 13 clause (1) that the company should opt for mandatory VAT registration in the UAE as it has crossed the mandatory VAT registration threshold of AED 375,000/- or the purpose of registration.
- In the first scenario (a), KKT LLC has standard-rated supplies of AED 305,000/-, Import of goods AED 100,000/- & Export of goods AED 150,000/-.
So, AED 555,000/- will be the turnover, which is above the mandatory VAT registration threshold. Hence, KKT LLC should opt for mandatory VAT registration for VAT in UAE.
In order to find out the eligibility of KKT LLC for VAT Registration in UAE, we need to consider the standard rated supplies, import of goods and export of goods only.
Exempt supplies will not be considered to arrive at the registration threshold.
- In the second scenario (b), KKT LLC is having
- Standard Rated Supplies AED 85,000/-
- Import of goods from outside AED 55,000/-
- Exports of goods AED 50,000/-.
So, the Taxable turnover is AED 190,000/-. In the second scenario, KKT LLC has a taxable turnover of AED 190,000. So, they can get registered voluntarily as they have exceeded the voluntary registration threshold of AED 187,500/-.
According to the UAE VAT Law if the company anticipates that the total value of taxable supplies stipulated in Article (19) of this Decree-Law or the expenses which are subject to tax that will be incurred will exceed the Voluntary Registration Threshold during the coming 30-day period then they can apply for voluntary registration
- In the third scenario (c), if KKT LLC is making only zero-rated supplies of AED 400,000/- then they can request the authority to get registration exception as per Article (15) of the Federal Decree-Law.
If in the first scenario, KKT LLC does not file its VAT Registration in the UAE application within 30 days of being required to register then the authority shall register the company with effect from the date on which the company first became liable to be registered for Tax and impose the necessary penalties in accordance with the Federal Law. In case of failure to submit a registration application within the timeframe specified by the tax law then, the penalty of AED 20,000/- will be levied.
- In the first case, KKT LLC has the turnover of AED 55,5000/-. It means it has exceeded the mandatory registration threshold of AED 375,000/- for VAT Registration in the UAE. So KKT LLC is eligible to register as per UAE VAT law. It should also be noted that if any exempt supplies are made by the company then it will not be considered while calculating the registration threshold for the purpose of registration.
- Only standard rated, supplies, import of goods and zero-rated supplies will be included in calculating the VAT registration threshold
- In the second scenario, KKT LLC can get registered voluntarily as it has reached the voluntary registration threshold of AED 187,500/-.
- In the third scenario, KKT LLC may except mandatory Tax Registration upon its request as its supplies are only subject to the zero rates as per article 15.
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