VAT Registration in the UAE
What businesses should do before registering for VAT in the UAE?
Embed VAT in your business plan
Start-ups and newly established businesses must embed the VAT into their business plan, strategies, policies, and processes. It is essential that they well understand the implications of the VAT and make every effort to align their business model to the Federal Tax Authority (FTA) compliance requirements.
Bookkeeping
Bookkeeping is essential for businesses to calculate the VAT registration threshold, and it is required by VAT regulations even if your business is not yet registered for tax.
When do I have to register for VAT?
A natural person (individual) or a legal person (company) conducting business in the UAE will have to register for VAT if their taxable revenues exceed AED 375,000 over the previous 12 months.
Voluntary registration
You can also register voluntarily if either your taxable revenues or expenses reach AED 187,500 over the last 12 months.
What are the benefits of a Voluntary VAT Registration?
- VAT saving: a big advantage of voluntary VAT registration is the ability to claim VAT on goods and services purchased for your business (Input VAT), that is a 5% saving on taxable purchases. In addition, you can reclaim VAT incurred before the registration on inventory and assets, provided that they exist on the date of registration.
- Boost your business profile, gives impression that your business is bigger and more successful.
- Banks & suppliers approvals: The Tax registration number (TRN) could be required by banks or large suppliers as part of their KYC process. many organisations are unwilling to deal with companies that aren’t VAT registered.
- Avoid late registration penalties: If you don’t keep a careful eye on your turnover then you might not notice when it reaches the VAT mandatory registration threshold. Many businesses fail to register on time as they have only 30 days to apply after reaching the threshold, and end up suffering a late registration penalty of AED 20,000. You can simply register voluntarily to avoid any complication.
How do I register for VAT?
You can register online and sign up at www.tax.gov.ae, E-service section.
What documents do I need to register for VAT?
Here are the major requirements:
- Company license
- Owners’ & mangers’ passports and emirates IDs
- Proof of authorization (articles of association or power of attorney)
- Revenue declaration form
- Company’s bank details (IBAN)
- Address & P.O. Box
Is there a timeframe to register for VAT? And what is the penalty if I did not register on time?
When reaching the mandatory registration threshold of AED 375,000 of revenues, you must apply within 30 days to avoid late registration penalty.
How long will it take for the FTA to process and approve my VAT registration application?
Normally, within 20 working days
What is a tax group? Am I eligible for registering as a tax group?
Within certain conditions, two or more companies can apply for a tax registration as a Tax Group to get one tax registration number (TRN)
What I have to do after the VAT registration?
Once you are registered for VAT in the UAE, you will need to:
- Charge VAT on all taxable supplies of goods or services that you make
- Issue valid tax invoices to your customers
- Determine the amount of VAT incurred on purchases (input tax) that you are entitled to recover
- Submit tax returns at regular intervals to the FTA via the e-services portal
Tips for VAT registration in the UAE
Seek a professional consultation
We strongly recommend that you seek a professional consultation from a Tax Agent to help you with the tax registration. I have seen many cases of adverse implications due to wrong applications like miscalculation of the registration threshold (quite common), missing the deadline of registration, and failing to understand the different of choices, which results in delayed approval.
If you need to do it yourself, please read FTA’s detailed guide (REGISTRATION, AMENDMENTS & DEREGISTRATION).
Provide true information
Do not overstate revenues or expenses for the sake of getting the Tax registration Number (TRN). This is illegal practice that could be easily detected later in any compliance check or tax audit conducted by the FTA where you will be required to provide supporting documents and bank statements.
Do good bookkeeping
Maintain your accounting records and all supporting documentations. This will help you to assess your registration threshold at end of each month (a historical test for the last 12 months). Bookkeeping will organize your records to taxable, non-taxable, exempt, zero-rated and so on. It will also help you if you are eligible to recover any VAT paid on purchases prior to the VAT registration.
Get prepared to charge VAT and file your returns
Once your application is approved by the FTA, you have to account for VAT starting from the effective date of registration as shown in your TRN certificate.
Accounting for VAT includes charging VAT by issuing correct tax invoices, keep track of VAT paid on expenses, and have a suitable system to help you generate a VAT return report. Simply you must know your all tax obligations.
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