Since it was announced that UAE implemented VAT on Value Added Tax (VAT) on January 1st, 2018, business owners must follow the rules, including UAE VAT Registration and tax filings.
Companies operating in the UAE should ensure that VAT is correctly collected and recorded to get it paid back to Federal Tax Authority (FTA).
UAE VAT Registration means that government officials recognize your business as a legitimate business to take VAT from your customers and remit this to the government.
As a business proprietor, you must be aware of the critical aspects of VAT and taxation in the UAE.
These are the step-by-step guide.
What is VAT?
The VAT tax is levied and imposed on the transaction of services and goods applied at every stage in the supply chain. It is calculated based on the value added at each step. This tax is indirect and imposed on the Government of UAE, at 5 percent on most businesses and products. However, items for food, education, and healthcare services are exempt from VAT.
VAT Registration UAE
The decision to declare VAT depends on your business’s turnover per year.
Exclusive from Registration for VAT Supply value less than Dh187,500
Voluntary UAE VAT Registration Supply of goods between Dh187,500 to Dh375,000
Mandatory VAT Registration The value of supplies that exceed Dh375,000
After the UAE VAT Registration is approved, your registered company will receive a unique tax identification number (TRN). Every VAT invoice will show the TRN.
UAE mainland businesses, as well as free zone companies, are taxed on VAT. Only designated zones established through Cabinet members of the UAE Cabinet are outside the UAE VAT taxation. The transportation of products between areas is free of tax.
It typically takes between 3 and 5 days for the tax registration process to complete.
VAT Return Filing
VAT-registered companies (taxable individuals) must file an annual VAT return to the FTA.
A VAT return is a summary of the supplies and purchases of a taxpayer during tax time to calculate the VAT liability.
You can file your VAT return online every month or every quarter by visiting FTA’s official website – https://www.tax.gov.ae/.
It is important to file tax returns on time, usually by the 28-day deadline. The tax period is the time frame that tax is due and due. The tax period:
* Monthly for companies with annual revenues over Dh150 million and above.
The quarterly rate applies to businesses with an annual turnover of less than Dh150 million.
As with other business revenues derived from customers, VAT is not an element of your business’s revenue. VAT collected is known as VAT liability & has to be paid to the government of the UAE.
Vat liability is the gap between the tax on output due (VAT imposed on the supply of services and goods) and the tax on input (VAT incurred when purchasing) which is recoverable for a specific tax time.
If the output tax exceeds the input taxes, they must be paid to FTA. However, if there is an excess of input tax above output tax, the taxable person can recuperate the quantity and apply it to the future payment due to FTA.
Documents Required for VAT Registration in UAE
You must provide proof of each document listed below to register for VAT.
- Certificate of registration or incorporation;
- Trade license
- Passport and visa, or Emirates ID of director/manager
- The partnership agreement or memorandum association, or other documents that contain information about the ownership of a business;
- The profile of the named company director;
- Bank account details;
- Contact details;
- Physical office;
- List of business directories or partners in the UAE over the last five years
The Federal Tax Authority would also need to declare the following:
- The natural or estimated value of financial transactions;
- The registered business activities of the applicant;
- Information on the anticipated turnover of the company over the next 30 days;
- The turnover of the business over the previous twelve months (supporting documents are required);
- Information on the company’s anticipated exempt supply;
- Information about the company’s exports and imports of the company;
- Information on the customs registration process;
- The business activities that take place in the GCC
The taxpayer or VAT-registered company is also required by the tax authorities to maintain the following records/documents:
- Tax invoices or any other document pertinent to the receipt of the goods or services you need;
- Credit notes for tax purposes, in addition to any other documents issued by the business in connection with the purchasing of products or services
- Record of tax-deductible products received or manufactured;
- Tax invoices, as well as any other document that is issued concerning services or goods;
- Credit notes for tax purposes and any other document issued to purchase items or services
- Documents of services or goods which are used or disposed of by the company for purposes not connected with the business, as with taxes paid in connection with such;
- Record of the imports and supply of goods or other products;
- Record of adjustments or corrections made to tax invoices, or any other account
- Documents of goods or other products which are shipped to another country
Any tax-paying person must keep tax records. That includes the following details:
- Taxes that can be recovered on imports or supplies;
- Tax recoverable subsequent adjustment or correction for error
- Tax due after adjustment or error correction
- Taxes owing on all tax-deductible items
UAE VAT Registration Process
You’re prepared to start the registration procedure when you have the soft copies of the previously mentioned documents.
First of all,
Sign up at the e-service and then establish an account
Complete the VAT online registration form
FTA (Federal Tax Authority) is an approved e-service account that is obligatory to register VAT. It is easy to create an account through their official site.
VAT Rates in UAE
The rates for VAT in the UAE differ from product to product. The standard rate for the government is 5%. You should charge this amount unless your product or service is in”zero-rated” or VAT exemption “zero-rated” or VAT exemption.
Zero-rated VAT rates apply to tax-exempt products; however, the buyer doesn’t have to pay VAT. Therefore, your VAT account should be able to record and report zero-rated VAT transactions too.
Certain goods and services, including the construction of residential structures, land, and financial services, are exempt from VAT.