VAT registration threshold UAE
VAT registration:
A business must register for VAT if the taxable supplies and imports exceed the mandatory registration threshold of AED 375,000. Furthermore, a business may choose to register for VAT voluntarily where the total value of its taxable supplies and imports (or taxable expenses) is in excess of the voluntary registration threshold of AED 187,500.
VAT (value added tax) was introduced in the United Arab Emirates on 1 January 2018. The general rate of VAT is 5%, although some goods and services qualify for a 0% rate or are exempt.
Business owners often ask us about VAT registration and other VAT matters, because like most taxes, although the general rules are relatively straightforward, it can get complicated in some areas.
These are some of the questions we often encounter regarding VAT, and particularly around the threshold at which businesses should register for VAT.
These answers are for general guidance. For advice on your specific circumstances, we recommend that you speak with your accountant or another VAT expert.
Types of Registration
Any business which exceeds mandatory or voluntary registration thresholds may be required or may be able to register for VAT
Mandatory Registration
A BUSINESS MUST REGISTER IF:
The total value of its taxable supplies and imports exceeds the mandatory registration threshold over the previous 12 months, or
The business anticipates that the total value of its taxable supplies and imports will exceed the mandatory registration threshold in the next 30 days.
The mandatory registration threshold is AED 375,000. This threshold is not applicable to foreign businesses.
Voluntary Registration
A BUSINESS MAY APPLY TO REGISTER IF IT DOES NOT MEET THE MANDATORY REGISTRATION CRITERIA AND:
The total value of its taxable supplies and imports or taxable expenses in the previous 12 months exceeds the voluntary registration threshold, or
The business anticipates that the total value of its taxable supplies and imports or taxable expenses will exceed the voluntary registration threshold in the next 30 days.
The voluntary registration threshold is AED 187,500.
Should my business register for VAT?
Your business must register for VAT if it is registered in the UAE and your annual turnover exceeds AED 375,000. This is based on your revenue activities over the last twelve months, or if you expect to exceed the limit in the next 30 days.
Registration in these circumstances is not optional. If you fail to register, you face being fined.
You can also register voluntarily under two different circumstances:
- Your annual turnover is below AED 375,000 but above AED 187,500.
- You have no turnover, but your expenses exceed the voluntary registration threshold.
Guidelines to VAT-registered businesses generally:
- must charge VAT on taxable goods or services they supply
- may reclaim any VAT they have paid on business-related goods or services
- keep a range of business records which will allow the government to check that they have got things right.
VAT-registered businesses must report the amount of VAT they have charged and the amount of VAT they have paid to the government on a regular basis. It will be a formal submission and reporting will be done online.
VAT Registration for UAE nationalities
VAT Refund for UAE Nationals is a special refund scheme in the UAE VAT law for supporting the UAE Nationals who are building new residences in the UAE.
If a person constructs a residential building, that person has to pay tax for the expenses incurred during construction which includes contractor’s bill, building materials, services of contractors, etc. The special Vat Refund Scheme for UAE nationals’ states that the tax paid for constructing the new residence can be refunded on certain conditions, explained below: –
- The person should be a natural person and a UAE national.
- The building should be a newly constructed one.
- The building should be only used as the residence of the person or the person’s family.
Why should each business owner seek VAT registration?
Seeking to meet the threshold for VAT registration in UAE must be a priority for each business.
Registering for Value Added Tax in the UAE can offer several benefits for businesses, including:
- Enhancing a business’s credibility as it demonstrates that the company is operating by tax regulations.
- Providing a competitive advantage, as many customers and partners may prefer to engage with registered businesses for transparency and compliance.
- Facilitating smoother transactions as it aligns with global taxation norms, making it easier to engage with international partners.
- Opening up business opportunities to bid on and secure government projects.
- Prompting businesses to adopt more robust accounting and financial management practices, improving efficiency and transparency.
Here are two ways you can know if the business will exceed the UAE VAT registration threshold:
1- Historic (looking back)
Review your taxable supplies in UAE for the past 12 months to determine whether the total taxable sales have exceeded the threshold for VAT registration in UAE. If it has, registering for VAT as soon as possible is necessary.
Businesses in the UAE must register as soon as they are eligible for mandatory registration to avoid a fine of no less than Dh20,000 the Federal Tax Authority imposes for failing to apply.
2- Future (looking forward)
Let’s assume your business hasn’t registered for VAT yet. If you predict that your business’s total taxable supplies will exceed the mandatory threshold for VAT registration in UAE for the next days or months, then you can register to apply VAT to your prices.
Note that:
- In practice, the future method is rarely used since businesses in the region have a larger total amount for taxable supplies over the past 12 months compared to the next thirty days.
- Basically, the historic method is the most common one to identify eligibility for VAT registration.
Deadline for VAT Registration in Dubai
- The UAE government now lets businesses in Dubai register for VAT. Companies from different areas are welcome to apply.
- You can register for VAT anytime, but the Federal Tax Authority (FTA) needs to approve category-specific applications.
- Before you start, make sure you’ve got all the needed qualifications, especially meeting the threshold for VAT registration in UAE.
Supplies not subject to VAT IN UAE
Two types of supplies don’t have VAT: zero-rated and exempt transactions.
1- Zero-rated:
It means you still pay VAT, but it’s 0%. For instance, if you export stuff outside the GCC, do international shipping, sell new homes within three years of building, or provide certain education and healthcare services, VAT is 0%.
2- Exempt transactions include:
- Certain financial services.
- Selling houses and land.
- Local passenger transport.
Inquire about threshold for VAT registration in UAE online
Are you looking to find out if you’ve met the threshold for VAT registration in UAE, or do you have inquiries regarding your finances? Get in touch with us now and ask anything you need. Our tax experts at your services for:
- Advice and guidance to VAT-related matters.
- VAT registration.
- VAT accounting.
- Returns Filing.
- Assisting with tax compliance.
- Assisting with tax-related planning and consultations.
- Register a tax group.
- Cancel a tax group.
- Amending tax registration.
- Cancellation of tax registration.
- Modifying tax period dates.
- Determine the tax period.
- Submitting a tax return.
- Conducting tax settlements.
- Claim a refund of input tax.
What is VAT Registration in UAE Exception?
Exceptions always exist in most matters. The same is the case with the VAT registration in UAE procedure which includes VAT registration documents submission. If a person takes the already existing business. Then, only the pertinent part of the business’s taxable supplies will belong to the person. who acquires the business and the same is supposed to be considered when calculating turnovers. The person who acquires the business will consider the turnover of the supplies made by themselves. And not on the supplies made by the previous owner.
Although there are some exceptions all businesses must keep in mind the importance of paying VAT on time. They must know how it is applied and where it is applied. If everything is not sorted out from the very start, it may create several complications for the businesses.
Consulting VAT consultants in the UAE may solve several problems for foreign business holders. This is because they are the ones having very little knowledge regarding VAT. And the criteria of its implications in the UAE. They thus require proper help from the authentic VAT experts in UAE.
Value Added Tax is a tax on consumption levied at each stage of the supply chain and ultimately borne by the end consumer. It is a transaction-based indirect tax which is levied at each step of the supply chain. End consumers generally bear the VAT cost while registered businesses collect and account for the tax, in a way acting as a tax collector on behalf of the Federal Tax Authority. VAT is used in more than 180 countries around the world. All OECD countries except for the US have VAT (or a variation). While it feels exactly the same as a general sales tax to end-consumers, It is a more sophisticated tax and overcomes many challenges that affect the general sales tax.