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VAT Registration Consultant in UAE2022-03-24T11:32:15+04:00

VAT Registration

Based on consumption rather than income, VAT is added to a product at every stage of the supply chain where value is added to it.

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Preventing liquidation of an unbalanced market will leave you in tears.

Ben Bernanke

The UAE is a ‘tax-free’ nation – take the statement with a pinch of salt. The nation is largely tax-free but that doesn’t mean that business persons are free as a bird bidding adieu to the annoying three-letter word (TAX) forever. Contrary to popular belief, UAE also has some taxes. For instance, the corporate taxes levied at the federal level from the international banks and energy firms operating in the UAE. Municipal/property taxes, excise taxes (on specific products), customs duties (on imports), etc. are some of the other forms of taxes imposed by the UAE government on businesses. Have you ever paid heeds to that additional 10% tax on your hotel and restaurant bills or that council tax component on your utility bills? Also, how can alcohol slip your mind! That too is heavily taxed upon import and purchase. And last but not least, VAT – introduced not too long ago. It was implemented in the UAE in 2018, at a rate of 5%. Perhaps we can rectify the statement by saying ‘the UAE is free of personal and corporate taxes”. The UAE tapped into charging taxes so the country doesn’t have to depend only on the oil and natural gas companies for funds necessary to run the country especially when the world is shifting its focus to sustainability and thus renewable forms of energy. You don’t have to sing a different tune if I say you have to pay taxes when you are doing business in any of the emirates of UAE. But before you fly the coop let me tell you – not every tax is for everyone.

Value Added Tax (VAT) in UAE

The term VAT doesn’t need much ink to be spilled on it. Businesses or consumers, no one is a stranger to the Johnnie-come-lately in the UAE, Value Added Tax. Over 160 nations use a VAT system (most of them belong to the European Union). UAE was not one of them until the UAE government decided to diversify its income sources. VAT or consumption tax in the United Arab Emirates came into effect on the 1st of January 2018. With VAT implementation, the government relieves the businesses from the additional tax burden and allows them to collect VAT on their behalf from customers at the point of sale and pay it to them. The standard VAT rate that applies to most goods and services in the UAE is 5% and the rest of the supplies are either subject to either a 0% rate or exempted for VAT (provided they are meeting certain criteria). The websites of the Federal Tax Authority and Ministry of Finance can give you detailed information about VAT.

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VAT Registration in UAE

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Businesses in UAE can register themselves for VAT voluntarily or mandatorily depending on certain criteria defined by Federal Tax Authority (FTA). VAT registration is done online on the FTA portal. Companies receive a Tax Registration Number (TRN) after a successful registration.

FTA has set a VAT registration threshold for companies segregating the process into two types – voluntary and mandatory. Companies have to analyse which category they fall in before registering for VAT or applying for TRN. Both the categories have different conditions to fulfil based on the total annual turnover of the company. There are various factors that businesses should take into consideration before they choose to register voluntarily or mandatorily. Another aspect to registering for VAT is they can choose either choose to apply as a single entity or a Tax group.

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VAT Registration Types

VAT registration is done in either of the two ways –

This VAT registration is compulsory for those businesses that are dealing in taxable supplies and imports with annual turnover equal to or more than AED 375,000. Businesses must undergo VAT registration even if they foretell the business’ VAT taxable turnover will exceed the threshold in the next thirty days. On the other hand, if the turnover is not expected anytime soon to cross the mandatory threshold for UAE VAT registration, then VAT registration is not required. But you can surely go for voluntary VAT registration.
Making the VAT registration possible yet optional for small businesses, entrepreneurs, and freelancers that have not reached the mandatory VAT registration threshold of AED 375,000, FTA does not mandate VAT registration for companies with annual turnover anywhere between 187,500 and AED 375,000. However, they still can go for the VAT registration if they wish to relish the benefits of being a VAT-registered business entity operating in the UAE.

VAT Registration Services in UAE

Whether voluntary or mandatory, the VAT registration process is the same. The tax authorities have a particular portal for the process where they can easily register their company. However, one has to be very mindful while undergoing the application procedure as this should be done correctly in order to get approval from authorities. Any discrepancy in the application can lead to hefty fines and/or rejection of the application. That’s why most businesses seek VAT registration service providers in UAE. Outsourcing the VAT registration task to experts in the field not only brings peace of mind to you but also helps you keep the unnecessary fines and delays in approval at bay. You don’t have to take pains when you have Adam Global in your city. We have VAT specialists who are active in the field for years.

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Post VAT Registration

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If you think that VAT registration is approved and you are all set then let us tell you that it’s just the tip of the iceberg. There are tons of things to deal with after you are registered for VAT in the UAE. You have got to notify the FTA about every big little change occurring in your company or any important information regarding the business. Case in point: address. Furthermore, you may have to adjust your business’ accounting process and prices of supplies if you will be registering for VAT. Registering for VAT means you won’t have to spend time and resources in making the modifications, particularly if you go through the voluntary registration process early on. Most VAT-related tasks including VAT record keeping and VAT return filing also demand expert hands. Plus, remaining VAT compliant is also not as easy as you think. We are not scaring you but showing the true picture basis our decades of experience. You might want to know what duties you are going to take as a VAT-registered entity in UAE. Keep reading.

Responsibilities of VAT-Registered Entities in UAE

After achieving the status of a VAT-registered business voluntarily or mandatorily, you will have to:

  • Submit VAT returns
  • File VAT refunds
  • Keep records and take into account all VAT transactions
  • Pay VAT due to the FTA
  • Charge VAT
  • Meet obligations of VAT-registered businesses
  • Abide by the requirement of maintaining records for VAT and report them to the authorities regularly

Adam Global: Your VAT Registration Service Provider in UAE

Registering a business for VAT in UAE is an easy-breezy process if we compare it with that in most of the other countries across the globe. Thanks to the user-friendly online portal of FTA. But that doesn’t mean there is no paperwork involved. You still have to gather plenty of documents to upload on the website for FTA’s review while applying for the VAT registration in UAE such as documents identifying authorised signatory, trade license of the company, certificate of incorporation, supporting documents for customs registration for each emirate (if applicable), supporting document for 12-month sales, and article of association, just to name a few. You have to provide tons of information while filling up the application such as the estimated value of exports/imports in one year from each GCC country, description of business activities, bank account details and whole nine yards. Even a single mistake or incorrect piece of information can result in application rejection and hassles to reapply not to mention the fines. No wonder most businesses outsource their VAT tasks to specialists in the area. No matter, what sort of VAT assistance you are looking for, Adam Global is your one-stop shop that has been handling all the aspects of business inception and expansion for almost 20 years. VAT is a part and parcel of business. We help your business remain in full compliance with relevant laws and regulations and make you and your finance team VAT ready as well by training them. Partner with us only if you are looking for qualified and experienced VAT advisors, VAT trainers or VAT support professionals in UAE who can provide you quality VAT advisory and compliance services.

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FAQ

Can I reclaim VAT in UAE?2021-12-26T06:11:36+04:00

You can only reclaim VAT if you’ve paid VAT on goods or services for use of a business and your business is registered for VAT, voluntarily or mandatorily.

What are the benefits of Voluntary VAT Registration in the UAE?2021-12-26T06:12:05+04:00

If your taxable turnover per annum touches the threshold of AED 187,500, then you are given the option to voluntarily register. Most companies choose to register their business on the VAT system register for VAT in UAE for various reasons. Some of the top benefits of registering your business for VAT when you are actually not bound to are that your company:

  • Will get a tax registration number (TRN) which puts a good impression on your clientele and eventually amplifies the degree of confidence of your existing and potential customers/clients in your small business.
  • Would qualify for refunds on VAT paid for business supplies. Even if you have been doing business for the past six months, but haven’t reached the threshold yet, being VAT-registered will allow you to reclaim VAT provided that you have kept invoices and records.
  • Can compete with big players in the industry as it will provide you with an edge over new small businesses that have not registered for VAT yet.
  • Opens to new business opportunities. As you know how most businesses, especially the established ones hesitate in working with a start-up unless it is registered for VAT in UAE.
  • Doesn’t have to bother about the penalties that may arise on a whim at the later stage when your taxable turnover reaches the VAT threshold.
How does VAT work?2021-12-26T06:12:35+04:00

Once you are VAT-registered mandatorily, you need to charge VAT on all the goods and services that you are dealing in except the exempted or zero-rated supplies and account for the VAT you collected from customers through tax returns filed with the FTA. You can recover the VAT you pay to your suppliers (input tax) on your tax returns by presenting the tax invoice or other evidence of the supply or import. For example, if you run a restaurant and pay AED 500 + AED 250 (5% VAT) = AED 5250 for food raw materials and after processing the food into meals you sell it to your customers at AED 15000 + AED 750 = AED 15750. You have to pay back to the VAT authority the VAT you charged from your customer minus the VAT you paid to your supplier i.e. AED 500 (AED 750 – AED 250). The VAT office will collect the VAT of AED 250 from the food supplier as well.

How does a VAT refund for tourists in UAE work?2021-12-26T06:13:03+04:00

VAT, as you may already know, is paid by the end consumer on goods and services bought. But tourists are exempted from paying VAT. Tourists shopping in the United Arab Emirates qualify to reclaim 85% of the total VAT amount paid (The remaining 15% is charged as an administration fee) provided that they meet certain criteria. In addition to that, cash refunds are capped at AED 7,000 per day as per new regulations imposed by the Federal Tax Authority. However, there is no such limit on the maximum recoverable amount if the transactions in question are made to a credit card. In order to be eligible for the VAT refund the tourists in UAE have to ensure:

  • The items they are expecting the VAT refund on are included in the FTA’s Refund Scheme.
  • They are buying goods from the retailers that are participants in the “Tax Refund for Tourists Scheme”. The seller will provide them a VAT free sticker on the goods purchased from their store.
  • They are leaving the UAE along with their purchases within the 90 days period from the date mentioned on the proof of purchase or invoice.
Is there any VAT charged on for Export shipments from UAE?2021-12-26T06:13:33+04:00

There is no VAT on export shipments in UAE. However, there is documentation that costs money to prove the export. Purchased items must be exported out of the United Arab Emirates starting from the day of supply. Export and process of purchase of products must be implemented in accord with requirements set forth by FTA.

What is tax-exempt business? Could you give me examples of VAT exempt sales?2021-12-26T06:14:04+04:00

Your business is VAT-exempt if you are trading VAT-exempt supplies only, or if you are not engaged in taxable ‘business activities’. For example, rents in Dubai for residential units are included in real estate transactions that are exempt from VAT.

VAT exempt transactions include basic necessities such as local passenger transport, books, lending activities, agricultural products, and tuition fees. Financial services, including life insurance and reinsurance of life insurance, financial services that are not performed for an explicit fee, discount, commission, rebate or similar type of consideration, and residential buildings (other than the zero-rated ones), and bare land also are included in the list of VAT-exempt businesses.