In the United Arab Emirates (UAE), registration for VAT is not compulsory for every business entity. While there are businesses that are required by the FTA or Federal Tax Authority in undergoing VAT registration, it is optional for small businesses, entrepreneurs, and freelancers that have not reached the mandatory VAT registration threshold.
In this article, we’ll take a close look at the aspects of voluntary registration for VAT that businesses should know.
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Who is Mandated to Undergo UAE VAT Registration?
VAT registration is mandated for businesses that have crossed the mandatory VAT registration threshold as mentioned earlier. The current mandatory vat threshold is set at AED 375,000 for a business’ annual supplies. You should register for VAT if you expect the business’ VAT taxable turnover will cross the threshold on the next thirty days or when your taxable turnover has reached over AED 375,000 in the previous twelve months.
If your turnover is not expected anytime soon to cross the mandatory threshold for UAE VAT registration, then you don’t have to undergo the process. But, you can most definitely opt in with voluntary registration for VAT and enjoy the benefits of being a VAT-registered business entity operating in the country.
Also Read: Hidden Benefits Of VAT Registration In UAE
How can I Register for VAT Voluntarily in UAE?
If you want to register for VAT voluntarily, you will follow the same exact registration process that businesses undertake for mandatory VAT registration.
The majority of businesses can register for VAT over the portal of the tax authorities. However, this is not the route that is recommended for small businesses as an application for VAT registration has to be done correctly in order to get approval from authorities. Any mistake or error can attract fines and/or rejection of the application.
Responsibilities of Business Registering for VAT Voluntarily in UAE
If you have undergone voluntary VAT registration in UAE and you are approved, you will take on the duties and responsibilities of entities that have undergone mandatory registration for VAT. Essentially, this means that you’re going to:
- Submit VAT returns
- File VAT refunds
- Keep records and take into account all VAT transactions
- Pay VAT due to the FTA
- Charge VAT
- Meet obligations of VAT-registered businesses
If your business has registered for VAT, you have to comply to the requirement of maintaining records for VAT and report them to the authorities.
Voluntary VAT Registration in UAE: Benefits and Downsides
While voluntarily registering for VAT in UAE may be an excellent option for most businesses, there are others that opt to remain unregistered. In order for you to decide if you should be registering your business for VAT, it is important you weigh the pros and cons for voluntary VAT registration.
Pros of UAE voluntary VAT registration
One of the top benefits of voluntary registration is your business would be able to get refunds on VAT paid for business supplies. Also, businesses with an annual taxable turnover of more than AED 375,000 are to register. Failure to do so will only acquire penalties. If your taxable turnover annually reaches AED 187,500, then you are given the option to voluntarily register.
Take note: For businesses exceeding AED 375,000 for their annual taxable supplies, they are to register on time in order to avoid fines and penalties for late VAT registration.
Similarly, you may have to adjust your business’ accounting process and prices of goods or services if you will be registering for VAT. Registering for VAT means you won’t have to spend time and resources in making the changes, most especially if you undergo the registration process early on.
Also Read: Questions And Answers Regarding VAT In UAE
Cons of UAE voluntary VAT registration
A downside of voluntarily registering is the price of goods or services you offer can appear to be more expensive onto the end user.
Another important downside to voluntary VAT registration is VAT-registered entities or taxable entities take on different responsibilities like the ones mentioned above. This includes maintaining records related to VAT, filing VAT returns with the UAE FTA, and keeping all VAT receipts and invoices. This can add extra administration and bookkeeping to your workload.
VAT Registration Specialists in UAE
If you are thinking of registering for VAT either mandatorily or voluntarily, it is important that you have a partner to help you manage VAT.
With VAT Registration UAE, it is very easy not only to register but also remain in full compliance to relevant laws and regulations. Our team even helps with the filing of VAT returns and accounting and bookkeeping for VAT. With decades of experience in the industry and a team of experienced regulated tax agents in Dubai, you get the assurance that you are working with reliable and competent professionals.
Are you interested in getting the help of experts? Contact us today to book a consultation!