Introduction to VAT in the UAE
Value added tax (VAT) was adopted by the United Arab Emirates on January 1, 2018, as part of continued efforts by the government to further diversify the economy and reduce its reliance on oil revenues. It is a consumption tax levied at all stages in the supply chain, right from production to sale. Ultimately, that is what the consumer pays, but it is the businesses that collect it and pass it on to the government. The UAE, as of the latest update, has a standard VAT of 5%.
Who Needs to Register for VAT?
Any business conducting activities in the UAE must mandatorily register for VAT if its respective taxable supplies and imports are greater than AED 375,000 per annum. Businesses with taxable supplies and imports greater than AED 187,500 but less than AED 375,000 can register on a voluntary basis.
Step-by-Step Guide to VAT Registration
Step 1: Create an e-Services Account
To register for VAT, businesses need to first create an e-Services account with the Federal Tax Authority (FTA).
● Visit the FTA Website: Go to the Federal Tax Authority’s website.
● Sign Up: Click on the ‘Sign up’ button and provide the required details such as your email address, password, and security information.
● Activate Account: After registration, you will receive an email to activate your account. Click the link in the email to activate your account.
Step 2: Log in to Your e-Services Account
● Log In: Use your email and password to log in to your e-Services account.
● Access VAT Registration: Once logged in, navigate to the VAT registration section.
Step 3: Fill Out the VAT Registration Form
The VAT registration form is comprehensive and requires detailed information about your business. Below is a breakdown of the sections you need to complete:
● About the Applicant:
○ Legal name of the entity (in English and Arabic)
○ Trade name (if applicable)
○ Identification details such as Emirates ID or Passport number
● Details of the Applicant:
○ Business contact information including address, email, and phone number
○ Banking details for VAT refunds
● About the VAT Registration:
○ Start date of VAT registration (if applicable)
○ Details of any previous VAT registration in the UAE or other countries
● Business Relationships (Optional):
○ Information about any other entities your business is associated with
● Declaration:
○ Confirm the accuracy of the information provided
○ Sign the declaration electronically
Step 4: Submit Supporting Documents
You will need to upload supporting documents to verify the information provided in the registration form. Commonly required documents include:
● Trade license
● Passport copy of the owner or manager
● Emirates ID copy of the owner or manager
● Proof of authorized signatory (e.g., Power of Attorney)
● Bank account details
Tax experts in UAE like Jaxa Chartered Accountants can assist in gathering and submitting the necessary documentation for VAT registration.
Step 5: Review and Submit Your Application
● Review: Carefully review all the information and documents provided.
● Submit: Once satisfied, submit your application.
Step 6: Await Approval
The FTA will review your application and in some cases require supplementary information or documentation. The processing period is normally several weeks. Once approved, you will be issued a VAT registration certificate showing your TRN.
Post-Registration Compliance
After obtaining your VAT registration, you need to comply with several ongoing obligations:
● Maintain Records: Keep detailed records of all transactions, including sales, purchases, imports, and exports.
● Issue VAT Invoices: Ensure all invoices include your TRN and meet the requirements set by the FTA.
● File VAT Returns: VAT returns must be filed quarterly (or monthly for some businesses) through the FTA’s e-Services portal.
● Pay VAT: Pay any VAT due to the FTA by the specified deadlines to avoid penalties.
Voluntary VAT Deregistration
Any business that makes supplies and imports the value of which does not exceed the compulsory registration threshold but is more than the voluntary registration threshold, AED 375,000: AED 187,500 can apply for deregistration. The process of VAT deregistration will involve application through the e-Services portal, stating reasons for deregistration.
Penalties for Non-Compliance
Non-compliance may lead to heavy fines, comprising penalties for late registration, late filing, and incorrect VAT returns. Thus, following the requirements set by a VAT system is very important to avoid these heavy penalties.
Conclusion
Registering for VAT in the UAE is straightforward if you follow the steps outlined above. Tax experts in UAE like Jaxa Chartered Accountants offer VAT registration services in Dubai at reasonable fees. Fees for VAT registration will depend on the type of business and you need to consult an approved tax agent in UAE for this. Complying with VAT regulations helps businesses maintain a clean record with the Federal Tax Authority and contributes to the economy of this great nation. For detailed guidance, consider consulting a professional taxation expert to stay updated on any changes to VAT laws and regulations for continued compliance.
Jaxa Chartered Accountants UAE can help businesses stay updated on any changes to VAT laws and regulations, ensuring continued compliance.
