This article provides an overview of VAT registration, including its requirements, benefits, compliance obligations, and common pitfalls. VAT registration is the formal process of enrolling with the Federal Tax Authority (FTA) to obtain a Tax Registration Number (TRN). Registered businesses must file periodic VAT returns, reporting both output VAT (charged on sales) and input VAT (paid on purchases). If input VAT exceeds output VAT, the excess may be carried forward or, in certain cases, refunded by the FTA, subject to approval.
Who is Required to Register for VAT in UAE?
Compulsory VAT Registration
Taxable individuals are required to be registered for VAT if their taxable turnover exceeds AED 375,000 annually. This includes:
- Business firms that market products and services
- Importers and exporters of taxable goods
- Online stores and e-commerce
- Consultants and freelancers earning above AED 375,000 per year
Voluntary VAT Registration
Companies with a taxable turnover of AED 187,500 to AED 375,000 are eligible to register on a voluntary basis. Voluntary registration would be appropriate for companies which:
- Want to recover input VAT on business costs
- Want to establish credibility with suppliers and customers
- Expect future growth in business and possible VAT charges
VAT Registration for Free Zone & Offshore Companies
- Approved Free Zone Companies – May be VAT partially exempt
- Non-Specified Free Zone Enterprises – Must be registered as mainland enterprises
- Offshore Enterprises – Must only register if they have a taxable presence in UAE
Benefits of VAT Registration in UAE
- Ensures VAT Compliance – Registering for VAT in UAE ensures VAT compliance with VAT laws and requirements.
- Recovery of Input VAT – Helps to seamlessly reclaim VAT charged on acquisitions, business expenses, and imports.
Voluntary-registering companies also enjoy a competitive advantage with VAT refund claims and improved cash flow management.
Also Read: How to Calculate VAT in UAE
VAT Compliance at Registration in UAE
Post-registration, companies have to adhere to UAE VAT laws by:
- Issuing VAT-compliant invoices with TRN
- Submitting quarterly or monthly VAT returns
- Keeping accurate VAT records for a period of five years
- Pay VAT charges to the FTA within time
VAT Regulations for Invoicing
There are two types of VAT invoices in UAE:
- Standard Tax Invoice (For payments above AED 10,000)
- Business name and TRN
- date and number
- Breakup of VAT (5%) and payable amount
- Simple Tax Invoice (For sales transactions of not more than AED 10,000)
- Name and TRN of Seller
- Price including VAT
Filing & Payment Requirements of VAT Return
VAT returns are to be filed monthly or quarterly as mandated by the FTA. Companies are required to:
- Post the total purchases and sales
- Calculate VAT payable (Output VAT – Input VAT)
- Pay VAT to the FTA on or before the 28th of the next month
Late filing of VAT returns incurs a first-time fine of AED 1,000 and a second-time fine of AED 2,000.
VAT Registration Mistakes to Avoid
- Late Registration – Register earlier than exceed the VAT threshold to avoid AED 10,000 fines.
- Incorrect Financial Details – Filing incorrect turnover amounts could lead to FTA delay in approval.
- Late VAT Return – Incurs penalty and possible lawsuit.
- Poor Record-Keeping – VAT invoices, receipts, and accounts need to be kept for a minimum of five years.
Also Read: Top VAT Consultants in Dubai
VAT Deregistration: When & How to Withdraw VAT Registration
Companies Need to Deregister VAT when:
- Their taxable turnover is below AED 187,500 annually
- They are shutting down business or dissolving
- They no longer supply taxable goods and services
Deregistration Process Involves:
- Filing of deregistration application via the FTA portal
- Adding supporting documentation (business closing, accounts, etc.)
- Pay all outstanding VAT returns and charges
- Waiting FTA approval and deregistration notification
Delayed deregistration incurs a penalty of AED 1,000 each month (maximum AED 10,000)
Seek the Expert Services of VAT Registration UAE
Businesses are advised to seek the expert services of reputable VAT Registration in UAE to seamlessly ensure compliance with VAT laws and requirements. Contact us today and we shall be glad to assist you.
FAQs: VAT Registration in UAE
Q1. Do all UAE companies need to register for VAT?
No, VAT registration is mandatory only for companies with a taxable turnover of AED 375,000 and above in a year. Companies with a turnover of between AED 187,500 and AED 375,000 can opt to register, and companies with an income of below AED 187,500 are exempt.
Q2. What if a company does not register for VAT within the specified period?
Late submission in the FTA timeline is fined AED 10,000. Non-compliance by businesses to VAT charges, tax return, and VAT record-keeping is also fined, and these may also invite additional legal action.
Q3. Can VAT deregistration be applied for after business registration?
Yes, business VAT deregistration can be requested if:
- Annual turnover is below AED 187,500
- Stops business
- No longer has taxed
The business that is deregistered can even be fined AED 1,000 per month but no more than AED 10,000 in total
Q4. How does VAT registration help businesses?
- Law compliance – makes UAE FTA taxation law the norm businesses must adhere to
- Recovery of input VAT – makes VAT reimbursement of expenses a norm
- Credibility – a company’s reputation is enhanced by virtue of having a VAT number
- Growth Readiness – puts businesses in place for tax payment and future development
Q5. What are VAT non-compliance fines?
FTA issues severe penalties for VAT non-compliance, which include:
| Non-Compliance Issue | Penalty |
| Delayed VAT registration | AED 10,000 |
| Late VAT return submission | AED 1,000 (first), AED 2,000 (second) |
| Incorrect VAT invoice | AED 5,000 per invoice |
| Non-adherence to VAT records | AED 10,000 – AED 50,000 |
Also Read: Difference Between VAT Registration and VAT Deregistration in UAE
