Since the UAE introduced the VAT on Value Added Tax (VAT) on January 1st, 2018, business owners are required to follow the rules, including UAE VAT Registration and tax filings.
Companies operating in the UAE must ensure that VAT is correctly collected and properly accounted for so that it can be paid back to Federal Tax Authority (FTA).
UAE VAT Registration means that your business is recognized by government authorities to take VAT from your customers and then transfer this to the government.
As a business owner, you must be aware of the critical aspects of VAT in the UAE.
These are step-by-step guides.
What is VAT?
Taxes on VAT are applied to the exchange of services and goods. It that is used at every stage in the chain of supply. It is calculated based on the value added at each step. This indirect tax is imposed on the Government of UAE at 5 percent on most businesses and products. However, food, education, and healthcare items are exempt from VAT.
VAT Registration UAE
If you need to declare VAT depends on your business’s turnover per year.
Exclusive from Registration for VAT Value of supplies that are less than Dh187,500
Voluntary UAE VAT Registration, The value of reserves is between Dh187.500 to Dh375,000.
Mandatory VAT Registration Value of supplies above Dh375,000
Your registered business will receive a unique tax identification number (TRN) when the UAE VAT registration is accepted. The VAT invoices on all VAT invoices will include the TRN.
UAE mainland businesses, as well as free zone companies, are taxed on VAT. The only ‘designated zones’ designated by Cabinet members of the UAE Cabinet are outside the scope of UAE VAT taxation. Moving goods within areas are 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) are required to submit an annual VAT return to the FTA.
A VAT return is a summary of the supplies and purchases that a tax-paying person makes during tax time to calculate the tax liability of VAT.
You can file your VAT return online every month or every quarter by visiting FTA’s official website – https://www.tax.gov.ae/.
Tax returns should be filed on time, usually by the 28-day deadline. The tax period is the time in which taxes are due and due. The tax period:
* Monthly for businesses with annual revenue of Dh150 million or greater.
* Quarterly rate for companies with an annual turnover of less than Dh150 million
In contrast to customer business revenues, VAT is not part of your company’s income. Instead, the VAT you collect is known as VAT liability & has to be paid to the government of the UAE.
Vat liability is the gap between the output tax to be paid (VAT applied to supplies of services and goods) and the tax on input (VAT incurred when purchasing) which is recoverable for a specific tax time.
If output taxes are more significant than input taxes, the excess must be paid to FTA. However, if there is an excess of output tax and input tax, the taxable person can recuperate the quantity and apply it to future payments to FTA.
Documents Required for VAT Registration in UAE
You must provide duplicates of these documents to register for UAE VAT Registration.
- Certificate of registration or incorporation;
- Trade license
- Passport and visa, or Emirates ID of director/manager
- A partnership contract, memorandum association, or another document which provides information on the business’s ownership;
- 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 actual or estimated value of transactions in the financial sector;
- The registered business activities of the applicant;
- Information on the anticipated turnover of the company over the next thirty days;
- The turnover of the business over the last 12 months (supporting documents are required);
- Information about the business’ anticipated exempt supply;
- All details about the business 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 and any other document pertinent to the receipt of the goods or services you need;
- Notes on the tax credit, in addition to any other documents that the company receives about the purchasing of products or services
- Record of tax-deductible products received or manufactured;
- Tax invoices and any other document that is the issue concerning products or services;
- Notes on the tax credit and any other type of document issued to purchase items or services
- Documents of services or goods that are disposed of or used by the company to deal with matters not connected with the business, as in the tax paid for these;
- Record of the imports and supply of goods or other products;
- Documents of corrections or adjustments applied to tax invoices or any other account
- Record of products or goods which are shipped to another country
Tax records must be kept by any tax-paying individual and include the following details:
- Taxes that can be recovered on imports or supplies;
- Tax recoverable subsequent adjustment or correction of error;
- Tax due following adjustment or error correction
- Taxes owing on all tax-deductible products
UAE VAT Registration Process
If you have your soft copies of the previously mentioned documents in hand, you’re in good shape to begin the registration procedure.
First of all,
Log in to e-service, and establish an account.
Input the UAE VAT registration form
FTA (Federal Tax Authority) authorized e-service account is required to register VAT. However, it is easy to create an account through their official site.
VAT Rates in UAE
The rates of VAT in the UAE differ from product to product. The standard rate of the government is 5%, and you should charge this amount unless your product or service is in”zero-rated,” or “zero-rated” or VAT exemption.
Zero-rated rates are available on tax-exempt products; however, the buyer is not liable for VAT. Your VAT account must record and report the VAT zero-rated transactions, too.
Certain goods and services, including the construction of residential structures and land and financial services, are exempt from VAT.