A company needs to hold a Tax Registration Number in the United Arab Emirates as only a business which has the said TRN will be able to claim for taxes and also will be eligible for a refund. This 15-digit number is also known as a VAT registration number and will be of great help to differentiate one company from another.
The TRN was brought into existence after the implementation of the Value Added Tax, which is an indirect tax added to a product after every level or stage in the product flow. The application of VAT in the UAE will not only help bring in a new source of revenue for the country but will also provide a reason for the various businesses to create and maintain business documents and records of the transactions.
A Tax Registration Number is significant for a business if it wants to charge VAT from the end customer. According to the law, it is understood that the invoice should mention the TRN number dedicated to the business. The failure to specify the name will result in the inability of the company to collect VAT from the end customer. Even if the company has already collected VAT without adequately mentioning the TRN number, in that case, the business must include the amount received in the tax returns and forward it to the tax authorities.
Benefits of a Tax Registration Number
Apart from the advantage mentioned above, there are various benefits of availing a Tax Registration Number. These benefits include:
- Only a business that has been registered for VAT and has a valid Tax Registration Number will be entitled to a refund for VAT.
- The Tax Registration number will streamline all the transactions and the communications of the buyer and the seller of a product making it easy to perform operations.
- The Cabinet Decision Number 40 of 2017 on Administrative penalties and Tax Laws in the UAE mentions that all the businesses must register for Value Added Tax and also avail a TRN without fail. Any failure will lead to penalties being levied on the company.
- The mention of the Tax Registration Number will help create a sense of confidence among the investors of the company that the business is compliant with the norms and regulations, as mentioned by the government of the country.
These benefits of a Tax Registration Number will not only increase the worth of a company but will also increase the number of investors in the company.
VAT Registration Requirements
The law has expressly stated the requirements according to which the companies in the United Arab Emirates need to register themselves for VAT. These requirements may be summarised as the following three points below:
- If the annual revenue of a business is more significant than AED 375,000, the business must register themselves for VAT. This registration is mandatory, and there is no exception to this rule.
- If the annual revenue of the company is less than AED 375,000 but more significant than AED 187,500, then the company has the option to register for VAT. Though the business has an opportunity, voluntary registration for VAT is preferred.
- If the annual revenue of the business is less than AED 185,000, there is no mandatory requirement of the business to register for VAT.
It is very important to accompany that the management understands the exact revenue of the business and provides the correct information in the applications while registering for VAT. This may be a complicated process and may require a degree of expertise. If any wrong information is entered into the application forms, the company may face penalties.
JAXA Chartered Accountants will help you in registering for Value Added Tax and also will help in handling the financial aspect of a company. The experts at JAXA Chartered Accountants will plan the best financial route for the company, which will render the company more profitable. Apart from VAT service, JAXA will also provide services that every company will require, such as accounting service, audit services, payroll service, etc. To know more about every service provided by JAXA, Contact Us. We will be happy to help.