Value-added Tax (VAT), was introduced in the United Arab Emirates (UAE) on 1 January 2018. The general VAT rate applied is 5% and it applies to most goods and services, with some subject to a 0% rate or an exemption from VAT (subjective to detailed conditions being met).
In UAE VAT standard rate is 5% on the invoice value (excluding special cases, e.g., profit margin scheme). For instance, if the Cost Price of the goods/services is = AED 100, knowing the VAT rate is 5%, then Input VAT (VAT paid during purchase) will be 100×5%= AED 5.00. Input vat commonly known as Vat Credit or Recoverable VAT.
A business must mandatorily register for VAT if its taxable supplies and imports exceed AED 375,000 per year. It is voluntary for those businesses whose supplies and imports exceed AED 187,500 per year.
VAT registration in the UAE
According to the Federal Tax Authority (FTA), it is mandatory for a business to register for VAT when their annual turnover reaches a threshold of AED 375,000/-. As per the UAE tax law, non-compliance with mandatory registration for VAT can lead to hefty penalties.
Businesses required to registered for VAT, may do it by creating an account on e-Services section provided on the FTA portal. A VAT consultant may be hired/outsourced to needful for your company.
Documents required for VAT registration:
- A valid e-mail (preferably company e-mail address) to be used as a login ID for the VAT registration with FTA
- Valid trade license, original and copy
- Passport and Emirates ID of each owner or partner
- Sponsors of the company’s owners must also provide their identification documents
- E-mail address and contact number of the person who is the authorized signatory for the applicant
- Passport and Emirates ID of the manager (it has to be made sure that the manager’s name is mentioned on the trade license)
- Company’s complete contact details, including telephone number, complete address and the PO box number
- Details of the company’s primary bank account, which includes the IBAN for VAT refund purposes (if applicable)
- Memorandum and Articles of Association of the applicant
- If the applicant owns other businesses, all documentation along with shareholder identification must be provided (if applicable)
- Audited or unaudited financial statements for the past twelve months
- Comprehensive details of the primary and secondary economic activities of the applicant (a general description for each activity is also required)
- Estimated revenue and expense of the aspirant for the next thirty days (it can be an rough calculation)
- Credentials related to customs registration of the applicant for each emirate in the UAE (if applicable)
- The predicted value for imports and exports for a period of one year for each GCC member state
- Complete details on customers or suppliers from other GCC member states (if applicable)
- Country name and Tax Registration Number of the applicant if it is registered for VAT from any GCC member state besides the UAE
There are certain scenarios in which a taxable person may deregister for VAT. These situations are taken into consideration with respect to the VAT Decree-Law.
Factors considered for deregistration:
- An individual or a taxable group who does not deal with taxable goods for a long period of time may apply for VAT deregistration
- An individual or a taxable group does not meet the threshold of AED 375,000/- per annum is also eligible to apply for deregistration
- If a taxable group is involved in tax evasion or non-compliance, the FTA can cancel their registration
- The taxable person or group must specify the method of deregistration; whether is mandatory or voluntary deregistration.
- Mandatory Deregistration: this is when FTA themselves cancel the tax registration if they are satisfied with the conditions of cancellation of VAT. If FTA validates that the company is neither generating any profits or does not anticipate to make any profit in the future, it mandatorily deregisters the person.
- Voluntary Deregistration: this a self-imposed choice by the applicant. Any individual or taxable group senses that they meet the conditions for deregistration may apply for cancellation of VAT registration. The valid reason shown should be confirmed by the FTA for the voluntary deregistration of VAT.
- Before deregistration the taxable individual or group must ensure that all VAT or administrative penalties due are cleared.
How can we help?
VAT can be a complicated process; we are registered tax agents and we understand that you may not get enough time to look into tax matters. Our agents and tax auditors will take care of your accounts, save your time with FTA matters, keep updated with tax laws and regulations and give free consultation.