The Implementation of Value Added Tax (VAT) has been a very important change in the taxation regime of the United Arab Emirates. The recent changes released by the Federal Tax Authority (FTA) has some new clarifications to understand.
Public Clarification on VAT registration of Sole Establishments
The Federal Tax Authority, UAE, has released a new public clarification ‘VATP021’ addressing the VAT registration of "Sole Establishments.' A Sole Establishment refers to a sole proprietorship business form that is 100% owned by a natural person and does not have a legal personality that is distinct from its owner. The important points to be noted in the clarification are:
1. As per Law, since each person can only obtain one VAT registration, the natural person should include all of his sole establishments under one VAT registration. The sole establishments are not eligible to get registered separately;
2. VAT registration should be sought in the name of the natural person. However, if the person wishes to use the name of one of its sole establishments, the FTA will consider the request;
3. While evaluating the Value Added Tax registration threshold, the natural person must consider taxable supplies made by the person and the value of supplies made by all sole establishments under his name collectively. If the collective value exceeds the registration limit, the person has an obligation to get registered;
4. If any sole establishment(s) has already obtained separate TRN in the past, the FTA will review such registrations in certain cases and will notify the registrants on the corrective steps to be made in their registrations. No action need be taken for amending the existing registrations until specifically directed by the Federal Tax Authority (FTA);
5. All future registration applications of Sole Establishments should adhere to this public clarification, i.e., they should be collectively registered under the name of the owner itself;
6. The above clarification does not apply to one Person Company LLC or other similar legal entities that are seen as distinct and separate legal persons from their owners.
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