Basic Requirements of VAT Registration in UAE

The VAT has been introduced in UAE reasonably recently and has some huge implications on the business conducted in the country. If a company is registered under the VAT law, then the business is legally allowed to collect Value Added Tax from the customers and remit these taxes to the government. The VAT was implemented in UAE from 1 January 2018 at a rate of 5% which was decided by all the GCC countries. This step was taken by the government to bring in an alternative source of revenue for the country. Let’s look at what are the pre-requisites and conditions for VAT registration in UAE.

What is VAT?

The VAT is a type of consumption tax which is levied based on the increase in the value of the product or service on the different stages of production or distribution. In this, the ultimate tax is borne by the consumer. All goods and services are taxed under it, with a few exceptions. More than 180 countries utilize this method of taxation except for the USA which uses a sales tax approach.

Now let us focus on some critical details that should be taken care of before VAT Registration.

The Necessary Requirements for Vat Registration

1. The businesses that need to register for VAT have been divided into three parts:

• Mandatory Registration

If the revenue of the company is AED 375,000 or exceeds this number, the business is liable to register for VAT.

• Voluntary Registration

The voluntary registration threshold has been kept at AED 187,500. Any business that generates revenue of AED 187,500 or more can register itself for VAT but is not obligated to do so. Nevertheless, registering for VAT is recommended for all the companies irrespective of the revenue as it is beneficial for the company in the future.

• Exempted from VAT Registration

Any business that generates revenue less than AED 187,500 need not register for .

2. If the expenses of registering a business are exceeding the limit of the voluntary registrations, in such case the VAT registration will be deemed optional for the business. This decision was taken so that the start-up businesses were encouraged to register for VAT.
3. The VAT registration is effortless as you don’t have to go to a place to conduct registrations as it is an online process. To register with the Federal Tax Authority UAE, you need to visit the VAT registration portal on the website of the FTA and enter the specified data.
4. The VAT is applicable in all the seven emirates of UAE and its free zones without any prejudice or discrimination. The only exception to this would be the free zones that have been labelled “designated free zones in UAE”.
5. It is required that all the registered businesses must fill out the VAT return and submit it to the FTA. After filing the VAT, the value for the input and output tax are determined.
6. If the output tax is more than the input tax, the difference between the two is required to be paid to the Federal Tax Authority. In the opposite case, i.e., when the input tax is more than the output tax in such a case, the excess tax can be recuperated from the Federal Tax Authority.
7. The taxable returns should be submitted to the federal tax authority at regular intervals. This period is usually 28 days after the end of the tax period.
8. To obtain the Tax Registration Certificate, you are required to send an e-mail. It should also be taken care that the sender has the authorization to sign. After the TRA accepts the application, the applicant will receive a response from the TRA.
9. Finally, the TRA would print the Tax Registration Certificate and will send it to the address mentioned in the application.  

The above essential conditions should always be taken care of by a business before registering for VAT. The VAT has a profound impact on the workings of the company. A business should be clear about all the various options available to it.

We at JAXA will take care of all your queries and will leave you in peace so that you can properly focus on the growth of your business. Also, we provide a range of other services such as Audit and Assurance Services, Tax Services, etc. which would take your business to new heights. In case of any query related to the services we provide, please contact us, we’d be glad to assist you.

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