VAT Registration in the UAE

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Value Added Tax (VAT) registration is a mandatory requirement for certain businesses under Federal Decree-Law No. 18 of 2022. Basically, it signifies the obligation of businesses to collect VAT on taxable supplies and remit it to the Federal Tax Authority (FTA). It also allows the businesses to claim input VAT credit. 

VAT registration is required for reporting, compliance and efficient tax administration. 

The law establishes clear criteria for mandatory and voluntary registration, provisions for tax grouping, and exceptions for certain entities. This article provides an overview of VAT registration, its requirements, and its practical implications for businesses operating in the UAE.

Understanding VAT Registration

VAT registration is a procedure through which a taxable person or their legal representative registers with the FTA. Upon registration, the FTA issues a Tax Registration Number (TRN), a unique identifier for each registrant.

Businesses can register for VAT through the eServices section on the FTA website. 

Mandatory Registration

It is mandatory for UAE-based businesses to obtain a VAT registration if the total value of taxable supplies and imports over the past 12 months exceeds the mandatory registration threshold of AED 375,000. 

For non-UAE based businesses, VAT registration is required if they supply goods or services in the UAE and no other person is obligated to account for the due tax. This registration mandate operates regardless of the threshold limit.

Certain government entities must also register under VAT. 

A taxable person may request an exception from VAT registration if it supplies zero-rated goods or services only that are subject to VAT under the reverse charge mechanism. However, any changes in business activities that eliminate the reason for the exception must be reported to the FTA promptly. 

Voluntary Registration

Any business not obligated to register may opt for voluntary registration if it meets the voluntary registration threshold of AED 187,500 per annum. This is applicable when the value of taxable supplies or imports exceeds the threshold within the previous 12 months or is expected to exceed it in the next 30 days. Voluntary registration is particularly advantageous for businesses with taxable expenses, enabling them to recover input VAT.

Tax Group Registration

Two or more related parties can apply for registration as a ‘Tax Group’. Tax groups are recognized as a single entity for VAT purposes, simplifying tax management and compliance. The FTA may reject applications or make amendments to the composition of a tax group.

Threshold Calculation

The VAT registration threshold and the manner of its calculation is important. The VAT threshold or the turnover includes:

• Taxable supplies i.e., supplies at the standard tax rate of 5%; 
  
  
• Zero-rated supplies but not exempt supplies;
  
  
• Deemed supplies; and 
  
  
• Imports and supplies subject to reverse charge mechanism in certain cases.  

Conclusion

VAT registration is integral to the tax framework in the UAE, ensuring that taxable persons meet their obligations and contribute to economic development. Besides the regulatory mandate, VAT registration becomes inevitable in commercial transactions for SMEs and startups, especially considering that many contracts are awarded to businesses with VAT registration. 

Disclaimer: Content posted is for informational and knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice