How to Register for VAT in the UAE
Introduction
Are you planning to expand your business into the United Arab Emirates (UAE) to get diverse opportunities? It is time to gain a good knowledge of the UAE’s VAT system. Wondering How to register for VAT in UAE? There are certain rules, regulations, criteria, and a lot more things to understand and follow when registering for VAT. The registration regulations are different for residents and businesses that are non-residents operating in the UAE.
If you are newly introduced to VAT, then you need proper guidance.
This article serves as a guide to give important insights into the UAE VAT framework. Once you get a complete understanding of this, you can effectively manage this aspect of your business activities in the country. So, let’s dive into the below sections to understand in detail;
What is VAT in UAE?
Generally, a tax is defined as a fee charged by the government on services, goods, income, and different forms of transactions to finance government expenditures and public services.
There are two forms of tax: Direct and Indirect. A direct tax is paid straight by the taxpayer to the government. Also, indirect tax is collected by an intermediary, who then remits the tax to the government on the taxpayer’s behalf.
The VAT in UAE is a form of indirect tax that is charged on goods and service consumption. VAT is applied at every stage of the supply chain. While registered businesses collect and report the VAT, it is ultimately the end consumers who have to pay the charge. In this case, businesses act as intermediaries for the government.
For resident businesses, the UAE VAT registration is AED 375,000 for annual taxable turnover. If your business exceeds this threshold, then you must register for VAT as quickly as possible. The voluntary registration limit is AED 187,500, and non-resident businesses have no registration threshold.
You can register for VAT electronically through the UAE Federal Tax Authority (FTA). After a successful application, it takes around 2-3 weeks to get your VAT registered number in UAE.
How to calculate VAT tax?
Input VAT Example: If a business buys goods for AED 150 with a 5% VAT rate, the Input VAT will be AED 7.50 (150 x 5%).
Output VAT Example: If a business sells goods for AED 300, the Output VAT will be AED 15.00 (300 x 5%).
Note: You must have an idea about how to calculate VAT tax before registration.
| Type of VAT | VAT Rate | Applicable Goods and Services |
|---|---|---|
| Standard VAT rate | 5% | It is applied to all types of taxable goods and services. |
| Zero VAT rate | 0% | Zero rate is applied to exports, crude oil and natural gas supply, international passenger transport, and public education. |
Eligibility Criteria and Documents Required for VAT Registration
Check out the VAT Registration Requirements.
Make sure the trade license copy is valid and not expired.
Copy of the passport of the owners/managers/shareholders.
A copy of the Emirates ID for the owners, shareholders, or managers holding the trade license.
Contact information for the company.
Memorandum of Association (MOA)
Contact details for the designated person, including important information like phone number, email address, etc.
Company bank details. Keep in mind that individual accounts are not accepted.
A turnover statement for the past 12 months. It must be signed by the company owner.
Submit sale samples and purchase invoices.
Submit a customs letter if your business engages with the customs department.
Note that all these documents will be submitted to the Federal Tax Authority. After you have successfully applied for VAT registration in UAE, it may take nearly 2 to 3 business weeks for FTA to conduct an evaluation and assess your VAT registration application. After a successful review, they will issue you your tax registration number (TRN).
VAT registration may require certain official documents, with these key documents needing to be completed before submitting the application to the FTA. Once the Tax Registration Number (TRN) is approved, a VAT certificate will be issued.
How to register for VAT in UAE?
Here is the process for VAT registration;
Sign up, register or log in to create an EmaraTax account on the FTA’s website. You need to activate your account.
Go to the EmaraTax account dashboard.
Now, you have to create a New Taxable Person Profile.
Select “View” to open the Taxable Person Account.
Click “Register” under the “Value Added Tax” section.”
Next, complete the registration procedure, fill in all the mandatory details, and submit the required documents.
VAT Registration for New Companies
Here are the steps on how to register for VAT in UAE for a new company;
The company has to create an EmaraTax Account.
Provide all the necessary business information.
Submit all the required documents asked in the portal.
If applicable, ascertain the VAT Group.
Apply for VAT registration online.
Obtain your Tax Registration Number (TRN) within a few weeks.
Tips to Remember Before New Company VAT Registration
New start-ups have to make a plan
As you start your company, you must think about VAT compliance.
Keep the records correctly
You must maintain proper records of all of your sales, purchases, and outlays.
Better take advice from a professional
It is important to speak and discuss with a tax expert if you have any queries regarding VAT.
Stay informed with the latest updates from the FTA
New businesses have to stay alert and updated on changes made to VAT legislation.
VAT Registration Cost, And Penalties
The cost to register for VAT is zero. VAT registration fee is free for all businesses, including new and existing ones. VAT late payment penalties start with an immediate 2% charge on the unpaid tax after the due date. This is followed by a 4% monthly penalty until the tax is paid, with a maximum cap of 300% of the outstanding VAT.
How to file a VAT return in the UAE?
Businesses have to file tax returns online by visiting the official FTA portal: eservices.tax.gov.ae. But, before you attempt to fill out the VAT return form, ensure that your business meets all the tax return requirements.
Frequently Asked Questions about VAT Registration in UAE
Who is required to register for VAT in the UAE?
Every business in the UAE must register for VAT if their taxable supplies and imports exceed the mandatory threshold of AED 375,000.
What are the consequences of late VAT registration?
You have to deal with fines and penalties for late VAT registration. The penalties for late VAT registration vary based on how late the registration is:
- If the registration is delayed by no more than 9 months, the penalty is 5% of the due VAT.
- If the registration is more than 9 months but less than 18 months late, the penalty is 10% of the due VAT.
Are there any costs associated with VAT registration in the UAE?
In the UAE, VAT registration is free, but if you want to obtain an attested registration certificate, it comes with a fee of approximately AED 250. In addition, there are penalties for non-compliance with tax regulations.
How long does it take to register for VAT in UAE?
The VAT registration in the UAE takes around 20 business days. Once you have successfully submitted your application and required documents to the Federal Tax Authority, the process begins. However, the process may take a little longer if there are certain issues.
What are the benefits of VAT registration in the UAE?
Your business will get legal compliance and prevent you from fines. Moreover, it will improve your operational credibility.
Is VAT refundable in Dubai?
Refunds can cover as much as 85% of the VAT paid after the deduction of a small processing fee. This simplifies tax-free shopping for tourists. Tourists can claim this refund at the airport before leaving the UAE, provided they validate their purchases within 90 days.
What is the deadline for VAT registration in the UAE?
When a business crosses the mandatory threshold of AED 375,000 in supplies or imports that are taxable, it is necessary to do VAT registration as quickly as possible within 30 days. If the business fails to register within this period, it will face substantial penalties.
