VAT Registration in UAE
1. What is VAT Registration in UAE ?
VAT is an abbreviation for Value Added Tax. VAT is a type of tax that is added to the price of goods or services at every stage of production or distribution. When a business sells a product or service, they add VAT to the price and collect it from the customer. The business then pays the collected VAT to the government. VAT is a way for governments to raise revenue to fund public services and infrastructure. It is typically a percentage of the sale price and varies between countries. In the UAE, VAT was introduced from January 1, 2018, with a standard rate of 5%.
VAT registration in UAE is the process by which businesses register with the Federal Tax Authority (FTA) to obtain a VAT number and become eligible to charge, collect, and remit VAT on their taxable supplies. It is mandatory for businesses that meet certain criteria to become eligible for VAT Registration in UAE.
Once registered, businesses must comply with VAT regulations, maintain proper records, issue tax invoices, and submit periodic VAT returns to the FTA. Failure to comply with VAT regulations can result in penalties and fines.
2. Who needs to register for VAT in UAE ?
In the UAE, the businesses or individuals that are covered in the below criteria are required for register for VAT in UAE. Based on their turnover the VAT Registration can be under any of the below two categories :
Mandatory Registration: This registration type is mandatory for businesses that meet the following criteria:
- Businesses with an annual turnover exceeding AED 375,000
- Businesses that expect to exceed the threshold within the next 30 days
- Businesses that provide taxable supplies or imports
- Non-resident businesses that make taxable supplies in the UAE and their customer is not obligated to account for VAT in UAE.
Voluntary Registration: This registration type is optional for businesses that do not meet the mandatory registration criteria but wish to register for VAT voluntarily. Businesses that register voluntarily can benefit from being able to reclaim the VAT they pay on their business expenses.
It is important for businesses to determine which type of registration they need to apply for based on their business activities and turnover, as failing to register when required can result in penalties and fines.
3. What are the documents required for VAT Registration in UAE ?
For VAT Registration in UAE, businesses are required to provide various documents to the Federal Tax Authority (FTA). The documents required may vary depending on the type of business and the registration type. Here is a list of common documents that are required:
- Trade License issued by the Department of Economic Development (DED)
- Certificate of Incorporation or Commercial Registration
- Emirates ID and passport copy of the owner or authorized signatory
- Memorandum of Association (MOA) and Articles of Association (AOA) or any similar document
- Financial statements or bank statements for the past 12 months
- Lease agreement or title deed for the business premises
- Customs registration number (for businesses that import or export goods)
- List of business activities and goods or services offered
- Tax residency certificate (for non-UAE resident businesses)
Additional documents may be required depending on the specific business and registration type. It is important to consult with a tax professional or the FTA for guidance on the required documents and registration process.
Download the list of Documents Required for VAT Registration in UAE
4. VAT Registration Process in UAE Explained Step by Step
In general, to get tax registration in the UAE, businesses must follow these steps:
Step 1 : Determine if your business meets the mandatory registration criteria.
Step 2 : Create an account on the Federal Tax Authority (FTA) online portal.
Step 3 : Complete the VAT registration application and provide all required documents.
Step 4 : Wait for the FTA to review and approve your application.
Step 5 : Once approved, you will receive a VAT registration certificate and be required to start charging and collecting VAT on your taxable supplies.
Step 6 : Maintain proper records and submit VAT returns on a regular basis.
It is important to note that the registration process and requirements may differ depending on the type of business and registration type. It is recommended to seek guidance from a tax professional or the FTA for specific guidance on how to get tax registration in the UAE.
What is the penalty for delay in VAT Registration ?
As per Article 7(2) of The Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax
The Person required to register for Tax pursuant to the provisions of the Decree Law must file a Tax Registration application with the Authority within 30 days of being required to register.
Failure by a Taxable Person to submit a registration application within the timeframe specified in the Tax Law is AED 10,000.