Vat Guide for Startups in UAE

There are so many sets of rules and regulations for VAT in UAE. This is why getting the correct advice from suitability qualified professionals is absolutely necessary, most especially for startups and small businesses. 

Facts that startups should know regarding VAT in UAE

  1. Businesses in the UAE need to undergo the VAT registration process if the taxable turnover from the previous twelve months is exceeding the VAT threshold. This includes startups and sole traders and not just limited liability companies. 
  2. The threshold for VAT in UAE is Dhs 375,000 for mandatory registration. 
  3. The taxable turnover threshold in which a business may be eligible for VAT deregistration is below the mandatory VAT registration threshold of Dhs 375,000. 
  4. The startup has to register for VAT when it expects to reach the turnover threshold in the following thirty days. 
  5. If a business is registered for VAT, it is to charge VAT for all sales that are eligible. VAT’s standard rate in the UAE is five percent, but some products and services are considered zero-rated or exempt for VAT. 
  6. When a business is registered for VAT, it is able to reclaim VAT that is paid on any purchase that is used for the business. 
  7. For a business that is registered for VAT, it’s going to work like the tax authority’s unpaid tax collector as it will be paying VAT to the FTA that is charged on products and services sold by the business minus the VAT that is paid on things that are bought for the business. 
  8. Following VAT registration in UAE, the customers have to be told that they are now registered for VAT. The business can then add the correct charge for VAT on the price of items that are bought from the business. The amount that is charged to customers has to be detailed on invoices or receipts. 
  9. Through VAT return filing in UAE, customers of a VAT-registered business may be able to claim back the VAT that is paid from your business. This means businesses will buy from you if they are registered for VAT as they end up purchasing supplies or services for less. 
  10. For customers that are not registered for VAT in UAE, they won’t be able to claim back any VAT that they have paid to your business. 
  11. The addition of VAT on price of a business make it less competitive to those that are not registered for VAT. This has to be considered as you agree or set a price for items as you become registered for VAT. 
  12. A VAT registered startup has to file VAT returns regularly. This is why it has to make sure that it has regulated tax agents in Dubai, UAE to help to keep accounts updated and tax returns are filed on time. 
  13. VAT registration in UAE is great for a startup as it can seem like the small business is a major player in the industry. As a startup, you’d want to grow. A great way in developing a client base that is steady is by presenting the business as a bigger and more established company than it actually is. 
  14. There is an option for startups that have not yet reached the threshold for mandatory VAT registration: voluntary registration for VAT. If your startup has annual taxable supplies of anywhere between Dhs187,500 and Dhs375,000, then it can voluntarily register. 
  15. Voluntary registration for VAT is great as it allows startup owners not have to worry regarding reaching the threshold for mandatory VAT registration and failing to notify the tax authorities.

If you want to know more about VAT registration in UAE, continue reading below for some FAQs or contact us today to talk to VAT Registration UAE’s regulated tax agents in Dubai

What will happen if I don’t file VAT returns in UAE on time?

If you don’t file VAT returns with the Federal Tax Authority (FTA) in UAE on time, then you will be issued a fine or penalty in addition to settling the VAT that is owed to the tax authority. If you work with regulated tax agents in Dubai, you will have to supply the information and records of transactions so they can file your tax returns for you. Experts will be working with you closely to ensure that you have everything needed and ready for the business to be fully compliant with tax legislation.

Will I be able to get VAT refunds?

Yes, this is one major benefit of registering for VAT. All expenses of the businesses with VAT paid will be subject to VAT refunds. We advise startups to consult with experts to address their specific needs and requirements.