The United Arab Emirates (UAE) has enforced Value Added Tax (VAT) since January 1, 2018. VAT is an indirect tax levied on the consumption of goods or services at the point of sale.
VAT registration in UAE
VAT is levied at every stage of the supply chain, with a tax rate of 5 percent. As with all indirect taxes, the cost burden is ultimately borne by the end user. However, it is the responsibility of businesses to collect and remit VAT from customers. Businesses collect and account for VAT on behalf of the government and can later claim VAT refunds from the government.
Mandatory VAT registration for all Business in UAE
All businesses in the UAE with an annual turnover exceeding the minimum threshold of AED 375,000/- are required to register for VAT under the Federal Tax Authority (FTA). Therefore, it is essential for businesses to ascertain their VAT registration obligations. Additionally, it is important for businesses to comprehend the level of detail required for the registration process.
Voluntary VAT registration
All businesses in the UAE with turnover surpassing the voluntary registration threshold of AED 187,500 are eligible to apply for VAT registration. Therefore, it is crucial for businesses to gain a thorough understanding of the types of supplies and services that should be included in calculating their annual turnover.
VAT Group Registration
Group registration for VAT is allowed for related or associated parties within businesses.
Required documentation for VAT registration
In the UAE, there is an online process for VAT registration and fee submission. It typically takes about 2-3 weeks to obtain the Tax Registration Number (TRN) from the Federal Tax Authority (FTA) after completing the online registration. The following documents are mandatory for VAT registration in the UAE:
- Copy of valid Trade License.
- Copy of License owner’s/owners’ passport.
- Copy of License owner’s/owners’ Emirates ID.
- Memorandum of Association (MOA) (not required for sole proprietorships).
- Complete address of the business.
- Contact information of the concerned person (mobile number, email).
- Bank account details.
- Information about any other entities owned by the owner.
- Signed and stamped Income statement for the preceding twelve months.
- Expected revenue and expenses for the next 30 days after VAT implementation.
- Other general information about business operations.