VAT registration of Sole Establishments

Brief

A natural person (an individual) owning several sole establishments in the UAE needs only one VAT registration for all its sole establishments and does not require separate VAT registrations for each establishment.

The Federal Tax Authority of the UAE (FTA) published a new VAT Public Clarification (VATP021) which clarifies the VAT registration obligations of a natural person in respect of its sole establishments.

Details

What is a Sole Establishment?

A sole establishment or sole proprietorship is a legal form of business license int the UAE which is 100% owned by a natural person. A sole establishment does not have a legal personality that is independent of its owner and is accordingly considered to be the same person as its owner.

This clarification does not apply to other legal forms that have a legal personality independent of its owners like One-Person Company LLC and Limited Liability Company LLC.

How to register a Sole Establishment for VAT?

Ideally, the owner of sole establishments should register for VAT as a natural person to obtain one Tax Registration Number (TRN) and file one combined tax return for all establishments that he owns. However, he can apply to the FTA to obtain the tax registration in the name of one of his establishments.

How to determine the VAT registration obligation?

To calculate the VAT registration threshold, a natural person must collectively consider the taxable revenues of all sole establishments that he owns, in addition to any personal commercial revenue.

What you should do if you have separate registrations for different sole establishments?

The FTA will review such registrations and will inform you about the corrective steps that you must follow.

No action is required to amend previous registrations unless notified by the FTA. However, for new VAT registration applications a natural person must consider all his sole establishments collectively and apply for one tax registration number.

Undeclared tax!

If an individual owns two sole establishments but registered one only on the basis that the other did not reach the VAT registration threshold on a stand-alone basis, then he is required to submit a voluntary disclosure to the FTA of any undeclared VAT.

If an individual did not register for VAT, even though the aggregate value of supplies made by him and his sole establishments exceeded the mandatory registration threshold of AED375,000, he will be required to notify the FTA and corrective action must be taken to account for the outstanding VAT.

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