UAE VAT Registration – Comprehensive Guide For Businesses
05 FEB, 2024 / Haroon Juma / VAT & Tax Blogs
VAT Registration in UAE
Registering as a UAE taxpayer under the UAE VAT legislation can be a challenging exercise for new businesses and registrants. The procedures are designed to be comprehensive to ensure only applications meeting the requirements under the law are issued a UAE Tax Registration Number.
For many businesses, Registering for UAE VAT often leads to frustration and delays. It is a common misconception the issuance of a UAE FTA TRN is a straight forward process.
The VAT system is evolving. The FTA continues to adapt the Tax system from empirical data and market experience. Consequently, due processes will also change to reflect these considerations and incorporated in the EMARATAX system.
If you’re a business owner in the UAE, this article provides key insights and a guide to UAE VAT registration, ensuring you can better navigate the process.
Understanding UAE VAT Basics:
An understanding the fundamentals of VAT is essential. The first goal is to determine whether your business conducts “Taxable Supplies”. The UAE VAT system, introduced in 2018, imposes a standard rate of 5% on most goods and services. Not all services or goods are considered taxable supplies, for example goods sold not passing through the UAE, or sold in designated free zones are not taxable supplies and considered “out-of-scope”. Therefore, understanding what constitutes taxable supplies, the different VAT rates and any exemptions that may apply to your business activities is necessary.
Determining The Basis of Your Application
The Legislation provides for a finite number of circumstances that allow either a voluntary or mandatory basis under which you can apply. Unless your business can provide proof of its eligibility, your VAT registration will not succeed.
1. Mandatory VAT Registration Threshold
Determining the financial thresholds that trigger and mandate VAT registration for businesses in the UAE is crucial. Businesses with taxable supplies, calculated from the preceding and next 30 days as annual turnover, exceeding AED 375,000, require mandatory registration for VAT. This rolling calendar method of calculation is a key measure to meeting your registration obligation and avoiding penalties. It is a common error for businesses to incorrectly link the turnover or income calculation to a calendar or financial year.
2. Voluntary VAT Registration
A second criteria is applying under a Voluntary Basis. The Legislation provides for businesses that meet a taxable supplies determination of AED187,500 for taxable supplies or taxable purchases for the preceding 12 months.
This is an especially useful benefit if you are a start up business. Voluntarily registering for VAT can provide your business with a competitive edge, signaling to customers and partners that you are committed to transparency and adherence to the tax regulations.
In addition, on registration your business is eligible to recover VAT on expenses. In your initial VAT filing, your business has the ability to claim VAT on expenses incurred and paid on goods and services for up to 5 years on services and 12 months of goods that are not sold.
VAT Registration Process Simplified
The Federal Tax Authority procedures are online and rigorous. The UAE Federal Tax Authority (FTA) provides an online registration for VAT registration, streamlining the application process. Preparation and clear understanding of the EMARATAX and procedural requirements are essential to minimise delays.
An initial step is to gather the necessary documentation, including trade licenses, financial statements, and other relevant paperwork.
Ensure accurate information is entered and monitor the application status through the portal for real-time updates. It is noteworthy the submission file is prescribed by the FTA and only presented information in the required format is acceptable. Care and attention is required to present your case supported by evidence.
VAT Compliance and Record-Keeping:
Once registered, your business is subject to compliance and reporting obligations under the Executive Regulations and Tax Procedures Law. You must pay attention to the importance of VAT compliance and effective record-keeping. It is essential to maintain detailed records of all transactions, including invoices and receipts.
A proper system for maintaining your books, tax reporting and documents should be implemented, including regular review and update of your records as taxpayer to ensure accuracy and compliance. This will position your business to meet the FTA desk based audit demands.
Common VAT Registration Challenges and Solutions:
VAT registration procedures are constantly evolving to ensure the tax system is robust and free from any risks. This means experience and understanding on the procedures is helpful to ensure a successful and timely application. Unfortunately, Businesses often find themselves in delays as result of misunderstanding the dues procedures, incomplete documentation and unclear basis of VAT registration.
From our experience, the most common issues for delays or rejections include:
1. Lack of planning and preparation. Have you planned the application before exceeding the threshold. Have you made sure that you have collated all the required documentation?
2. Inability to prepare a clear basis for registration. If you are asked, have you prepared the transactional summary to present the calculation for taxable supplies? Do you have a clear understanding of taxable supply?
3. Lack of details in supporting the basis of your registration. Do you have all the required documents required to submit your submission?
4. Lack of understanding of FTA requirements and processes. Have you read and understood the FTA guides and processes?
5. Changing FTA policies. Is this your first time or did you register another company sometime back? If so, it is likely you may not be updated with the current protocols and will be unprepared.
Being aware of these challenges and proactively addressing them to process the application with ease.
Post-VAT Registration: Best Practices:
After successful registration, the post-registration responsibilities are numerous best practices are necessary to ensure ongoing compliance. Your business must stay informed on tax law updates, changes to procedures and compliance, and handling amendments. This will require regularly reviewing your financial activities to identify any changes that may impact your VAT obligations and taxpayer profile.
Navigating the UAE VAT registration process is pivotal for your business. As a UAE business or individual receiving commercial consideration, UAE VAT Registration is mandatory if your taxable supplies exceed AED375,000 in the next 30 days.
If your UAE business is unsure or inexperienced with UAE FTA requirements and regulations, it is highly recommended that you secure support.
VAT Registration Consultancy Services
It is beneficial engaging professionals experienced with tax procedures. As an approved FTA Tax Agency, SimplySolved has registered scores of businesses. Our in-depth understanding can help to prepare, file and manage VAT registration. Our experts possess in-depth knowledge of the UAE tax regulations and can guide you through the intricacies of the registration process.
By leveraging our expertise, you can streamline the process, saving time and minimizing the risk of errors. This proactive approach ensures that your VAT registration is handled efficiently, allowing you to focus on your core business activities.
Simply Solved is an ISO 9001 & 27001 certified company and a registered FTA Tax Agency. Our team of experienced consultants and tax agents provides high-quality, cost-effective services for all Tax matters for companies of all sizes.
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As an FTA Accredited Tax Agency with ISO 9001 Quality & 27001 Information Management Certification, we offer a quality-based approach to our services supported by dedicated team of certified professionals.
We support our clients with defined processes, platforms and expertise to deliver advisory, project and outsourced services in Accounting, Tax, Auditing, HRM & Payroll & ERP solutions. Our offerings are specially designed to meet the UAE Regulations to put you in control of your information, comply to the legislation and help you make better business decisions.