The United Arab Emirates (UAE) is renowned for providing an attractive tax environment, where individuals enjoy the benefit of 0% income tax on their personal earnings. However, this does not mean that the UAE is entirely tax-free. It imposes corporate tax and Value Added Tax (VAT) on both individuals and businesses. While personal income remains untaxed, VAT, with a rate of 5%, is applicable to most goods and services, excluding oil revenues. This article serves as a simple guide to VAT registration in the UAE for businesses and individuals who meet the criteria.
VAT Registration Criteria:
VAT registration in the UAE is not mandatory for all businesses. If your taxable imports and supplies exceed AED 375,000, you are required to register for VAT with the Federal Tax Authority (FTA). Taxable supplies, as defined by the FTA, encompass goods or services provided by businesses in the UAE, subject to either a 5% or 0% tax rate. Imports are also taken into account when determining eligibility for VAT registration.
Understanding VAT Process:
In essence, businesses collect VAT from their clients and remit it to the government. Additionally, any VAT paid by a VAT-registered business to its suppliers can be reclaimed from the government. To initiate the VAT registration process, one must create an account on the FTA website by visiting “eservices.tax.gov.ae” and selecting ‘Sign Up.’ After providing the required details, a confirmation email will be sent with further instructions.
VAT Registration Requirements:
To complete the VAT registration application, you will need to provide the following information:
1. Personal details
2. Banking information
3. Contact information
4. Business information
Once the application is submitted and approved, a tax registration number (TRN) will be issued, which is necessary for future VAT return submissions. It is worth noting that there is no registration fee for using this service.
If there arises a need to deregister for VAT, it is possible to do so. However, for those who have voluntarily registered, a minimum registration period of 12 months is mandatory. The following are reasons to deregister for VAT:
1. The value of taxable supplies falls below the voluntary threshold.
2. The company ceases making taxable supplies.
VAT Payment Process:
Submitting a VAT return can be done through the FTA eServices portal. The process involves:
1. Logging in to eService and click the VAT tab.
2. Completing the form, including income and VAT calculations.
3. Submitting the return.
4. Making the VAT payment.
Understanding VAT Executive Regulations:
To ensure businesses in the UAE comprehend the VAT registration requirements fully, the Ministry of Finance has established VAT executive regulations. Key points from these regulations are as follows:
1. The mandatory registration threshold is AED 375,000.
2. Registration application must be filed within 30 days of meeting the registration requirements.
3. Failure to register for VAT may result in penalties according to Federal Law No. (7) of 2017 on tax procedures.
4. Taxable persons must account for all taxable supplies and imports in case of late registration.
In conclusion, the UAE’s tax environment offers attractive features, but VAT registration is compulsory for businesses with taxable imports and supplies exceeding AED 375,000. By adhering to the VAT registration process outlined by the Federal Tax Authority, businesses can navigate the taxation system effectively. Understanding the requirements and following the guidelines ensures a seamless VAT registration experience in the UAE.