UAE VAT Registration - FAQs on VAT Registration in UAE - Part 1.

Greetings to our LinkedIn community. Today, we get into details of VAT registration and filing VAT returns in the UAE. We have picked some of the most asked, but basic yet important questions regarding VAT. If we miss any important question, or you have a query regarding VAT, you can mention in the comment section, or reach us personally on email or call anytime.

More than 150 countries implement VAT or its equivalent, which is known in some countries as ‘Goods and Services Tax.’ These countries include some of the most important global markets, such as EU member states, Canada, Malaysia, Singapore, Australia and New Zealand. Let’s know some more details about VAT and address a few questions.

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What is VAT?

Let's start with the most basic, yet the most important one: “What is VAT?” Understanding the concept of VAT is important for all business owners, managers, professionals and entrepreneurs.

Firstly, VAT (Value Added Tax) is a consumption tax, which basically means that it is ultimately paid by the end consumer. Although, VAT is charged at each step of the ‘supply chain,’ it is the end user who bears the cost of Value Added Tax.

VAT is collected by the businesses and then they pay it forward to the government. In case, a business has paid more tax to its suppliers than it has received, it can get a refund from the government. Ultimately, the tax receipts to government show ‘value add’ throughout the supply chain.

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What is UAE VAT Registration?

By VAT Registration, we mean to register the company with the government for submitting Value Added Tax. Upon successful registration, the concerned tax authority in the UAE, namely Federal Tax Authority (FTA) issues a unique VAT identification to the company.

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What is the difference between VAT and Sales Tax?

VAT and sales tax are both consumption taxes; these both are charged from the end-consumer. However, there are a few differences:

• Sales tax is generally imposed on transactions involving goods, while VAT is applied on goods as well as services.
• Furthermore, sales tax is imposed only on the final sale to end-consumer. However, VAT is charged on each step of the ‘supply chain.’

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In VAT (Value Added Tax) based systems, businesses serve as tax-collectors on behalf of government, which helps reduce tax-evasion and misreporting.

Which Companies are Required to Register for VAT in the UAE?

The businesses having taxable imports and supplies that exceed the amount of 375,000 AED must register for VAT. Besides, the companies exceeding the amount of 187,500 AED can also register for VAT voluntarily; it is not mandatory upon them to register.

In case a company fails to register for VAT, they become liable to pay penalties and face legal consequence.

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How Much VAT is Charged in the UAE?

The standard rate of VAT is 5% (Five Percent) in the UAE. However, there are a few sectors that are exempt from VAT. Additionally, there are also zero-rated supplies that are rated at 0% instead of 5%.

Which sectors are exempt from VAT?

The following categories of supplies are exempt from VAT. These supplies should be traded within The United Arab Emirates.

• Financial Services
• Residential properties
• Bare land
• Local passenger transport

Which are zero-rated sectors?

If you are trading in zero-rated supplies, you will be charged 0% VAT. However, it’s important to remember that these supplies must be declared properly in VAT returns submitted during every tax period. The following supplies are charged with 0% VAT.

• Exports of goods and services to countries outside the GCC.
• Precious metals, such as gold and silver. Which are 99% pure and available in tradable form.
• International transportation, and related supplies.
• Supplies of certain sea, air and land means of transportation (such as aircrafts and ships).
• Certain investment grade precious metals (e.g. gold, silver, of 99% purity).
• Newly constructed residential properties, that are supplied for the first time within three years of their construction.
• Supply of certain education services, and the related goods and services.
• Supply of certain healthcare services, and the of related goods and services.

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How to Register for VAT in UAE?

In order to register for VAT, an application – along with required documents – is forwarded to the Federal Tax Authority (FTA). Upon successful submission of the request, FTA will issue a VAT Registration Certificate, which can be downloaded online from the applicant’s account.

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What are the Required Documents for VAT Registration in the UAE?

The companies registering for VAT in the UAE are required to submit the following documents for registration process:

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• Passport Copies – of business partners/owners (As mentioned on business license)
• Emirates ID – of business partners/owners (As mentioned on the license)
• Business License - (Trade/commercial License)
• Complete Address of the company
• Details of any branches of the company, if any
• Memorandum of Association (MOA)
• Company’s bank account details – with IBAN letter
• Contact details of the authorized signatory, including email and phone number
• Details of any branches, if applicable
• Expected turnover, revenue and taxable expenses for the next 30 days
• Turnover Declaration – with stamp and signature by the owner or the manager.
• Custom code – along with a copy of Dubai Customs Letter.
• GCC export or import details – if applicable
• Preference for or against registration as a Tax Group

Depending upon the jurisdictions or business activities, some additional documents may also be required for the VAT Registration process.

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Is there any Benefits of VAT Registration in the UAE?

VAT registration is good for the reputation of your business. As per clients' perspective, they tend to prefer a business that has VAT certificate and is fully compliant with the FTA.

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That aside, regarding financial benefits, you can claim VAT on your purchase of goods and services. To illustrate this point, you should understand the concept of input and output tax. Briefly, input tax is the tax that YOU PAY for goods and services, while output tax is the tax that YOU CHARGE on the sale. So, in case your input tax is higher than the output tax, then you can claim it back via HMRC.

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Do I need to Maintain Financial Records for VAT Compliance?

Absolutely! It is of extreme importance that you maintain accurate financial records of your company. It helps calculating taxes correctly and demonstrates your compliance with the UAE VAT regulations.

It is also important to mention that accurate records help both the underpayment and overpayment of taxes. So, it’s also important for your financial stability.

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What is Tax Group Registration in UAE?

Businesses in the UAE can apply for tax group registration, which allows several enterprises of various types to form a tax group. The FTA will issue a single Tax Registration Number (TRN) for the entire group. The representative company of the group must submit the application for tax group registration, and specific criteria must be met by each potential member of the tax group.

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Have More Questions?

We hope this post has helped you understand the VAT Registration in UAE. If you have more questions in mind, feel free to comment on this post. You can also reach us via email or drop us a message here.

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Aabi Chartered Accountants for your VAT Registration in UAE

Our team of qualified professionals offer their expertise to businesses, helping them prepare necessary documentation for VAT registration and guiding them throughout the VAT Registration process.

Our expert services include Auditing, Accounting & Bookkeep, ESR, Financial Advisory, ERP and more.

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If you have any enquiry, visit www.aabi.com or contact us at- +971 55 441 1036 or Email us at:- [email protected] .