Value Added Tax or VAT in UAE is an indirect tax that’s chargeable on products and services purchased or sold by businesses in the country. VAT is applicable throughout UAE and the GCC-implementing states.
A business operating in UAE must undergo VAT registration if its taxable turnover has reached AED 375,000 in a twelve-month period. If your annual taxable supplies are under the mandatory registration threshold, currently at AED 375,000, you may choose to voluntary VAT registration once your business has a taxable turnover of AED 187,500 or expects the taxable turnover to reach over AED 187,500 in a single period of thirty days.
How does VAT registration in UAE affects small businesses?
A multi-stage tax, VAT is imposed at several different stages to the sale and purchase of items and services. Let’s take a look at how VAT registration and implementation affect small businesses:
- Business transparency – as the appropriate VAT rate is levied at every stage of a sale or purchase transaction, tax evasion of any kind can be tough to commit. This helps promotes business transparency.
- Close monitoring of business operations – VAT for small businesses in UAE allows for a thorough check of all transactions which take place. This results to close monitoring of the overall performance of businesses.
- Boost in credibility – there is a certain authenticity that’s associated with businesses, regardless of size, when they are registered for VAT. Businesses and individuals are more willing and comfortable when they’re dealing with VAT-registered businesses.
- Huge monetary savings – with VAT registration in UAE, businesses become eligible in claiming VAT refunds. This means huge savings as taxes can be claimed for those paid within UAE for business purposes.
- Regulatory compliance – VAT registration is obligatory for businesses with an annual turnover of more than AED 375,000 as mentioned earlier. Penalties for violations of businesses’ VAT obligations include administrative fines and the possibility of license revocation for serious offenses.
Read also: VAT On Commercial Property And Real Estate In UAE
How can I apply for UAE VAT registration?
For businesses that qualify for mandator or obligatory VAT registration in UAE, deadlines based on turnover are announced by the FTA with the registration carried out in phases. Although it’s crucial for all types of businesses to determine their VAT-related obligations, it’s also important to know exactly how to file an application for registration for VAT purposes and understand the details that are required in completing the process.
This is because prior to applying or starting VAT registration procedures, having a complete understanding of the kind of details and steps required in completing VAT registration can help in preparing well and ensure approval by the Federal Tax Authority. You can also commission the help and guidance of regulated tax agents in Dubai, UAE to avoid penalties from errors or unnecessary delays from furnishing the tax authority with incorrect or insufficient details. What you want to ultimately avoid is a rejection of your registration application. Steps to apply for UAE VAT registration are the following:
- Creation of an account with the Federal Tax Authority
- Completing the VAT registration form
Take note: the VAT registration form consists of eight sections under which details are to be furnished in order to complete the process of registering for VAT in UAE. These eight sections are:
- About the applicant
- Applicant details
- Contact details
- UAE banking details
- Business relationships of business owners
- Regarding the VAT registration
- Final review and submission
Read also: Penalties For VAT Deregistration In UAE
Two or more legal entities or businesses can apply for group registration for VAT purposes. A VAT or tax group is comprised of at least two businesses that are registered with the Federal Tax Authority as a single entity subject to the fulfillment of the conditions set under VAT regulations. Group registration is for VAT purposes only.
If you want to apply for a VAT group registration, you need to be eligible. Each business that wants to be under a tax group for the purpose of VAT should have the following:
- a fixed establishment; or
- Place of establishment within the UAE
A fixed establishment is a fixed business place wherein business operations are conducted permanently or regularly and where a sufficient level of technology and human resources exist. The resources must enable the person to supply or acquiring products or services. It includes branches of foreign corporations.
As for a place of business, it is where a business is legally located or established within the UAE. This is pursuant to the establishment’s decision. Place of business can also be where significant management decisions take place with central management functions being conducted. Myriads of businesses opt for group registration as they will be treated by the tax authority as one entity. IT helps in simplifying VAT accounting and compliance reporting.
To know more, call us here in VAT Registration UAE today!