It is important to understand and be able to explain the VAT threshold in the UAE if you have a business that is operational in the UAE. In the realm of value-added tax, there is a term called as the VAT threshold. Any commercial entity must facilitate for VAT every time it is like lying revenues in a certain year to surpass the recommended VAT threshold. This article will acquaint the readers in detail with regard to the VAT thresholds that exist in the tax system of businesses in the UAE. VAT Registration UAE is a registered tax consultancy firm that has all the information about the VAT threshold UAE, and therefore can assist any company to register with the Federal Tax Authority if it qualifies to be registered.
What is the VAT threshold in UAE and How to determine VAT threshold?
Businesses that surpass either statutory or optional registration thresholds may have to register for VAT, or they may be exempt from it. There are two types of registration thresholds in UAE for VAT:
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Mandatory registration threshold
A company must register mandatorily for VAT if,
The aggregate amount of its taxable imports and supplies during the preceding 12 months above the required registration threshold, or
In the next thirty days, the company expects the total value of its taxable imports and supplies to surpass the required registration threshold.
The required minimum amount for registration is AED 375,000. Foreign firms are not subject to this criterion.
If a business doesn’t meet the mandatory registration requirements, it can nevertheless apply to register.
The aggregate amount of its taxable imports, taxable supplies, and taxable costs over the preceding year surpasses the level for voluntary registration, or the company expects that within the next thirty days, the entire value of its taxable imports, taxable suppliers, and taxable expenses will above the threshold for voluntary registration.
In the UAE, businesses with an annual taxable turnover exceeding AED 375,000 must register for VAT, ensuring compliance with tax regulations. For those with turnovers above AED 187,500 but below the mandatory threshold, voluntary registration is available, offering potential tax benefits and input tax recovery options and no registration threshold for non-resident businesses.
AED 187,500 is the voluntary registration threshold in the UAE
VAT Threshold calculation formula in the UAE
Although the precise formula for determining the VAT threshold varies depending on national rules, the general formula is
Formula : VAT Cutoff Point = Total Taxable Revenue
VAT registration becomes required if the computed value exceeds the specified threshold.
Understanding the VAT Threshold GCC
VAT has been adopted in Saudi Arabia in the GCC member countries of KSA; Bahrain, Kuwait, Oman and Qatar. Thus, the essence of the VAT threshold in GCC is similar when in all of these countries even if the specific rates of VAT may vary.
Consequently, regarding the specific determination of a certain figure as the point when businesses become required to register for VAT, as well as all the other prerequisites involved, it is deemed appropriate to consult the respective laws of each GCC country.
Based on the stated VAT thresholds, your company has to immediately apply for VAT registration if its taxable turnover exceeds the registration limit. It is for this purpose to ensure that if one does not register, he does not undergo a penalty or an equivalent loss. The penalty for not giving a valid VAT registration application is of up to Dh20000.
What compliance rules are applicable if the VAT threshold is met and the company gets registered for VAT?
Following approval for VAT, the firm will be in charge of the following:
- Preserving VAT accounts and records, as well as keeping all VAT invoices
- The VAT charged on the product or service that the business entity sold to its customers or clients.
- Imposing the VAT on all the products and services that are considered as taxable under the legal provisions and requirements formulated by the Federal Tax Authority
The General Requirements of VAT Deregistration for the UAE
All companies and traders have to pay VAT even in a situation where their annual turnover is below the VAT threshold; nevertheless, even when a company has no more taxable supplies over the Dh375,000 threshold, it does not need to deregister. A business’s registration will be deemed optional whenever its total taxable supply falls below the required VAT threshold.
Nonetheless, its turnover or total taxable supply must fall below the required VAT threshold if it decides to go through with VAT deregistration in the United Arab Emirates.
Moreover, regardless of the fact whether a specific company is above the VAT registration limit or not, if a firm cancels its VAT registration, then it stops its business operations if it forms part of a VAT group with other related enterprises.
VAT Registration and Deregistration Services in UAE
As for the procedure of compliance with the provisions of VAT, it should be noted that Regulated tax agents in Dubai makes it easier. We can help with the registration procedure if your company’s annual taxable supply is more than AED 375,000. The team of professionals at VAT Registration UAE ensures efficiency in the registration process after which it helps organizations to enroll with the Federal Tax Authority. Therefore, let VAT Registration UAE handle the VAT compliance so that you don’t have to bother about it.
