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VAT Registration

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Importance of VAT registration

Here are some of the most important benefits of registering for VAT in the UAE:

1. Legal compliance

  • Legal compliance: First and foremost, having a VAT registration helps your business comply with UAE tax laws. If your company's supply threshold exceeds AED 375,000 and you fail to register this within 30 days, your business gets exposed to unwanted penalties. Avoiding these foreseeable risks is always a good idea for both financial prosperity and business reputation.

2. Enhanced financial management

  • VAT registration encourages a culture of meticulous financial record-keeping. In adherence to FTA regulations, maintaining precise records of your VAT-inclusive transactions—both purchases and sales—is essential. This practice enables accurate tax reporting on eligible supplies and imports, helping you manage your cash flow better and ensuring transparency.
3. Government benefits
  • By registering for VAT, you also position your business to take advantage of potential tax refunds and various government incentives. Should your input tax exceed your output tax, your business could qualify for a VAT refund. This can significantly benefit your financial strategy by reducing overall tax liability.

Who should register for VAT in the UAE?

Local businesses and international corporations operating in the UAE must register for VAT within 30 days of their taxable supplies and imports crossing the mandatory registration threshold of AED 375,000. Enterprises not meeting this mandatory limit can still opt for voluntary registration.

Mandatory registration

You have to mandatorily register for VAT if your business’s taxable supplies exceed AED 375,000 within the past 12 months or if you anticipate surpassing this limit in the next 30 days. Taxable supplies cover all your sales within the UAE, including VAT. Failing to complete your VAT registration in the UAE under these circumstances can lead to penalties.

Voluntary registration

If the total value of your taxable supplies and imports exceeds the voluntary registration threshold of AED 187,500 but does not exceed AED 375,000, you can select this option. Voluntary registration for VAT in the UAE benefits startups and small businesses as it allows them to claim input tax credits on purchases.

VAT exemption in the UAE

As per the the UAE Federal Decree-Law No. (8) of 2017, the following sectors are VAT exempted and need not undertake registration for VAT in the UAE or file the VAT returns:

Bare
Land

The supply of bare land, i.e., undeveloped plots, is not subject to VAT.

Provision of Financial Services

Financial services that are not conducted for an explicit fee, discount, commission, rebate, or a similar consideration enjoy VAT exemption.

Local Passenger Transport

Services providing passenger transportation within the UAE, such as buses, taxis, and metros are exempt from VAT.

Residential
Properties

The lease and sale of residential buildings, other than those specifically zero-rated, are exempt from VAT in the UAE.

VAT penalties in the UAE

Non-compliance with VAT laws in the UAE can lead to penalties of up to AED 50,000. There can also be fines and legal action involved. For instance, a delay in VAT registration in the UAE can result in a penalty of AED 10,000.

Additionally, failure to make VAT payments on time can also result in a 2% penalty of the unpaid tax due immediately. This is followed by a 4% monthly penalty, which becomes due one month after the due date of payment. 

How to Register for VAT in the UAE for a New Company

Registering for VAT in the UAE is a crucial step for businesses to ensure compliance with local tax regulations. Here’s a step-by-step guide on how to apply for VAT registration:

  • Determine Eligibility: Assess whether your business is required to register for VAT based on your annual taxable turnover. You must register if your turnover exceeds AED 375,000. You can also choose voluntary registration if your turnover is below this threshold but exceeds AED 187,500.
  • Trade Licence: A valid trade licence issued by the relevant authority in the UAE.
  • Passport Copies or Emirates IDs: Copies of the passports or Emirates IDs of the authorized signatories.
  • Proof of Authorisation: Documentation proving authorization for signatories, if applicable.
  • Contact Information: Business contact details, including address and PO Box.
  • Bank Letter: A letter from your bank verifying your company’s bank account details.

Additional Documents: Such as Articles of Association or Partnership Agreement, if required.

  • Create an e-Service Account: Visit the Federal Tax Authority (FTA) website and create an e-Service account to access the VAT registration form and other related services.

Fill Out the Online Form: Log in to your e-Service account and complete the VAT registration form. Provide details about your business, including activities, turnover, and bank details.

  • Review and Submit: Review the completed form for accuracy, then submit your VAT registration application.
  • Pay Fees: Follow the instructions on the FTA website to pay the VAT registration fee, if applicable.
  • Submit Required Documents: Provide the FTA with any additional documentation required to support your application.
  • Await Approval: The FTA will review your application. If approved, you will receive a Tax Registration Number (TRN) and a VAT Certificate. The process typically takes around 30 days.

Documents Required for VAT Registration in the UAE

Organization-Related Documents:

  • Trade Licence: Proof of your business’s legal operation.
  • Memorandum of Association (MOA): Outlines the company’s structure and roles.
  • Bank Account Details: For VAT transactions.
  • Email ID and Contact Details: For FTA communication.
  • Office Address: Physical address of your business.
  • Yearly Turnover Report: Details of your business’s turnover.
  • Customs Details: For businesses involved in import/export.
  • Emirates ID of Partners: For all partners or owners.
  • Power of Attorney Documents: If someone else is registering on your behalf.
  • Additional Documents: As requested by the FTA.
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Maintaining Compliance Post-Registration

Best Practices:

Charge VAT as Required

Add the standard VAT rate (5%) to taxable supplies and display it on invoices.

Keep Detailed Records

Maintain accurate records of income, costs, and VAT charges. The FTA recommends keeping these records for at least five years.

Submit Timely Returns

File VAT returns to the FTA according to your tax period.

Issue VAT Invoices

Ensure all taxable supplies have VAT invoices with necessary details such as date, unique ID number, and TRN.

Comply with FTA Regulations

Follow all FTA rules on invoice formatting, record keeping, and VAT return submissions.

Streamline Your VAT Calculations

For accurate VAT calculations and compliance, consider using a spend management platform like Mantraa Advisory Service. Our platform ensures that the correct VAT rate is applied to each purchase and calculates VAT owed with precision, minimizing human error and providing accurate data for VAT returns.

Contact Us if you are looking to automate VAT calculations or need assistance with your VAT registration. We are here to help you navigate the process smoothly and ensure full compliance with UAE VAT regulations.

Get In Touch

Connect with Mantra Advisory Service for seamless VAT registration. Our experts simplify the process, ensuring compliance and accuracy every step of the way. Save time and stay compliant—reach out today to get started with your VAT registration!

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