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A Comprehensive Guide to UAE VAT Registration

January 11, 2023

The United Arab Emirates implemented value-added tax (VAT) on January 1, 2018. The rate of value-added tax is 5%. The United Arab Emirates will continue to deliver high-quality public services using the revenue generated by the VAT. It would also assist the government in progressing towards its objective of lessening dependence on oil and other hydrocarbons as a source of income.

VAT-registered companies collect the tax on behalf of the government; VAT is borne by consumers in the form of a 5% increase in the price of taxable products and services purchased in the UAE.

At each stage of the supply chain, tax-registered enterprises in the UAE must pay 5% VAT on the taxable supply of products or services.

Additionally, tourists in the UAE pay VAT at the time of transaction.

VAT obligation is the difference between the output tax due (VAT charged on deliveries of goods and services) and the input tax recovered (VAT incurred on purchases) for a certain tax period.

The difference between the output tax and the input tax amount must be paid to FTA. Any time a taxable entity's input tax exceeds its output tax, that entity's taxable person is entitled to a credit against any future FTA payments in the amount of the excess input tax.

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When Do You Register for VAT?

Required Registration

For local companies, the threshold for mandatory VAT registration is 175,000 AED. If a company's imports and taxable suppliers surpass a certain threshold, it must register for VAT either in the following month or the preceding year.

Voluntary Registration

Voluntary registration of VAT is allowed if the value of imports and the threshold for taxable suppliers exceed AED 187,500 in either the upcoming month or the prior year.

Non-Resident Registration

If a non-resident undertakes work that is taxable under UAE law, regardless of the aforementioned thresholds, the non-resident must register.

The tax that a firm receives from its consumers and pays to the government Simultaneously, it gets a tax return from the government for taxes paid to its suppliers.

In addition to being able to recoup the VAT they incur when visiting the UAE, foreign companies may also reclaim the tax.

Both mainland UAE and free zone enterprises subject to VAT are subject to the same tax regulations. If the UAE Cabinet, however, classifies a certain free zone as a "designated zone," then that zone must be considered foreign territory for tax reasons. Tax exemptions apply to the movement of commodities between special economic zones.

When are Businesses Required to Register for VAT?

Every firm that collects VAT must submit a return to the FTA on a regular basis, often within 28 days after the end of the "tax period." A "tax period" is the time frame for which the tax must be determined and paid. The typical accounting year is

  • Companies with an annual revenue of less than AED 150 million are audited quarterly.

  • Companies with an annual revenue of AED 150 million or more are audited monthly.

It will be the company's responsibility to keep accurate records of all financial transactions, including sales, expenses, and VAT fees.

Businesses and merchants that are registered for VAT are required to charge VAT to all of their customers at the current rate, and they are also responsible for paying VAT on any purchases made from VAT registered suppliers. The government receives or requests the difference between these two amounts.

What are the UAE VAT Rates?

Most products and services are subject to the standard VAT rate of 5%, while some are either free from VAT entirely or have a lower rate of 0%. (subject to specific conditions being met).

Exports of products and services beyond the VAT-implementing Gulf Cooperation Council (GCC) member states, international transportation, the supply of crude oil and natural gas, the initial supply of residential real estate, and some specified categories, including healthcare and education, are exempt from VAT.

In addition, if a person has a temporary presence in the state for less than a month and the presence is not effectively connected with the supply, they will be considered to be "outside the state" and eligible for zero-rating exports of services per Cabinet Decision No. 46 of 2020, dated June 4, 2020.

Certain financial services, as well as the following supply of residential real estate, are free from value-added taxation. Furthermore, the sales of undeveloped property and transportation services inside the country are excluded from VAT.

VAT may not apply to certain sales and purchases of products between businesses located in different UAE-designated free zones. However, in line with the general application of the UAE VAT Act, VAT is charged on the provision of services inside DZs.

Enhanced Functionality of the Electronic Filing System

Most products and services are subject to the standard VAT rate of 5%, while some are either free from VAT entirely or have a lower rate of 0%. (subject to specific conditions being met).

Exports of products and services beyond the VAT-implementing Gulf Cooperation Council (GCC) member states, international transportation, the supply of crude oil and natural gas, the initial supply of residential real estate, and some specified categories, including healthcare and education, are exempt from VAT.

In addition, if a person has a temporary presence in the state for less than a month and the presence is not effectively connected with the supply, they will be considered to be "outside the state" and eligible for zero-rating exports of services per Cabinet Decision No. 46 of 2020, dated June 4, 2020.

Certain financial services, as well as the following supply of residential real estate, are free from value-added taxation. Furthermore, the sales of undeveloped property and transportation services inside the country are excluded from VAT.

VAT may not apply to certain sales and purchases of products between businesses located in different UAE-designated free zones. However, in line with the general application of the UAE VAT Act, VAT is charged on the provision of services inside DZs.

When to File for VAT Returns

At the conclusion of each tax period, VAT-registered firms or "taxable individuals" are required to file a "VAT return" with the Federal Tax Authority (FTA).

A VAT return summarizes the value of a taxable person's supplies and purchases during the tax period and displays the taxable person's VAT obligation.

You are required to submit your tax return online using the FTA site, eservices.tax.gov.ae. Ensure that you have satisfied all tax return criteria prior to submitting the VAT return form via the site.

The FTA has the discretion to designate a unique tax period for certain industries. In accordance with Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE, penalties will be assessed for the late filing of tax returns.

How to Register

To sum it up, even if you're not a UAE resident, you'll still need to register for VAT if your firm generates revenue that's subject to UAE taxation. As a foreign company, you must register for VAT within 30 days after your first sale. 

The Federal Tax Authority specifies the documents that must be submitted for VAT registration in the United Arab Emirates:

  • Company Registration Certificate 

  • Directors Passport Copy

  • Company Bank statement or letter

  • Bank account details including IBAN and SWIFT/BIC

  • Date of first sale in UAE 

  • For Amazon sellers we also need a screenshot of the business address from Amazon.se seller central

The registration for UAE VAT will be sent to the Federal Tax Authority. Therefore it may take 1 - 4 weeks to complete the registration and receive a VAT number.

If you're not sure whether you need to register for VAT or if you need help with registration, we'll be happy to help. Simply contact us, and one of our specialists will get back to you within one business day.

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