What is the VAT threshold and when do you need to register for VAT?

The VAT threshold is the total taxable supplies that need to be reached in order to undergo VAT registration with the UAE Federal Tax Authority. 

A business entity operating anywhere in the UAE has to process VAT registration if:

  • It has earned Dh375,000 (current mandatory VAT registration threshold) or more in a span of twelve months; 
  • It is expected to have taxable supplies that are over the current VAT registration threshold in UAE in the next thirty days.

Bear in mind the twelve-month period doesn’t need to align with the ongoing tax year. This means there is a need to regularly check whether the business’ taxable supplies for the past twelve months have crossed the threshold for mandatory registration for VAT in UAE

How much is UAE’s VAT threshold?

The threshold for mandatory VAT registration in UAE is Dh375,000 while the threshold for voluntary VAT registration is Dhs187,500.

As mentioned earlier, the threshold for VAT registration is set annually. The threshold for UAE VAT registration can change, which means it is best to be updated regarding updates on taxation and legislation in the region. 

What Will Happen if I Meet the Current VAT Registration Threshold?

If the taxable turnover of your business has crossed the vat registration threshold, it has to send an application for VAT registration immediately. This is to ensure that it does not get fined or penalized for non-registration. The fine can reach up to Dh20,000 for failure to furnish a VAT registration application. 

As soon as the business has been approved for VAT, it will be responsible for the following:

  • Keeping all VAT invoices and maintaining VAT accounts and records; 
  • Submitting VAT returns; 
  • Paying VAT charged on services or goods that are bought from the business entity; and 
  • Charging VAT on all goods or services that are taxable as per the Federal Tax Authority’s directives

What Will Happen if the Business Will only Reach the VAT Threshold Temporarily?

If the taxable supplies of the business are temporarily over the current UAE VAT threshold, it does not have to undergo VAT registration. The taxable turnover of the business is considered over the threshold for VAT temporarily by the FTA.

Take note: the business has to provide evidence that the taxable supplies will remain below the mandatory VAT registration threshold for the next twelve months. 

Also, it is important to remember that legislation on tax in UAE, particularly VAT, is constantly updated. This means a business is advised to consult with a tax specialist in Dubai to ensure that it is following the updated regulations on tax and is totally compliant with existing laws. 

The VAT Deregistration Threshold in UAE 

Although it is required for businesses to undergo VAT registration if their turnover goes above the threshold for VAT, they are not required to undergo the deregistration process for VAT even when it no longer has taxable supplies of over Dh375,000. Once a business has total taxable supplies below the mandatory VAT threshold, its registration will be considered as voluntary. 

However, if it chooses to undergo VAT deregistration in UAE, it’s turnover or total taxable supplies have to be below the mandatory VAT threshold. 

In addition, a company that belongs to a VAT group together with other businesses is required to stop trading when it cancels its VAT registration, regardless of whether it’s above the VAT registration threshold or not. 

VAT Threshold and Regulated Tax Agents in Dubai 

Regulated tax agents in Dubai make it very easy and simple for businesses and corporations to manage all matters related to taxation in the UAE, including VAT registration, VAT invoices, and VAT accounting. 

Suppose the taxable supplies of the business are below the threshold for mandatory VAT registration and it is not registered for VAT voluntarily. In that case, a regulated tax agent may still be able to help. This is by monitoring the business’s taxable supplies and ensuring it is registered when it is compulsory to avoid getting fined thousands of dirhams only for failing to submit an application on time. 

If the turnover of the business goes beyond the threshold, it can also benefit from the expertise and experience of tax agents. They are capable of guiding the business and making sure it is issuing the right invoices which are valid in the eyes of the authorities. Not just that as experts may also be tasked with being your representative and acting on your behalf in dealing with the FTA. Our team of tax specialists can help you with all tasks related to VAT in UAE, as well as address any of your concerns. Call us today for a free, no-obligation initial consultation.