The United Arab Emirates (UAE) introduced Value Added Tax (VAT) at a rate of 5% on January 1, 2018. VAT is a consumption-based tax applied to the sale of goods and services and is collected at each stage of the supply chain. Businesses operating in the UAE must register for VAT if their taxable supplies and imports meet specific thresholds. VAT registration is not only a legal obligation but also a vital part of ensuring smooth business operations and compliance with Federal Tax Authority (FTA) regulations.

Who Should Register for VAT?

VAT registration in the UAE falls into two categories: mandatory and voluntary.

Mandatory Registration:

• If your business has taxable supplies and imports exceeding AED 375,000 in the past 12 months or is expected to exceed this amount in the next 30 days, VAT registration is compulsory.

Voluntary Registration:

• If your taxable supplies and imports exceed AED 187,500 but do not exceed AED 375,000, you may register voluntarily.
• Businesses with taxable expenses exceeding AED 187,500, such as startups, can also opt for voluntary registration.

Exemptions:

• Businesses that exclusively provide exempt supplies are not required to register for VAT.

What Counts Toward the Threshold?

To determine whether a business meets the VAT registration threshold, the following factors are considered:

Taxable Supplies:

• Standard-rated supplies (5%) such as goods, services, and professional fees.
• Zero-rated supplies (0%) including exports, certain healthcare and educational services, and international transport.

Imports (Reverse Charge Mechanism):

• Goods and services imported into the UAE where the buyer accounts for VAT.
• These are considered taxable supplies for threshold purposes.

Deemed Supplies:

• Transactions treated as supplies for VAT, such as giving away business assets for free.

Not Included:

• Salaries, exempt supplies (like residential rent and certain financial services), and local purchases where VAT is already paid.

Types of VAT Registration

Individual Registration:

• For single entities meeting the threshold.

Group VAT Registration:

• Two or more related businesses can register as a VAT group, provided they meet the conditions set by the FTA. This allows consolidated VAT reporting.

Voluntary Registration:

• Startups and businesses not yet reaching the mandatory threshold can still register to recover input VAT and appear more credible to suppliers and clients.

Documents Required for VAT Registration

To register for VAT, businesses typically need the following documents:

• Copy of trade license(s)
• Passport and Emirates ID of the owner/authorized signatory
• Contact details of the business
• Bank account details
• Details of business activities
• Proof of turnover (e.g., financial statements or invoices)
• Customs registration details (if importing/exporting)

How to Register for VAT

Step-by-Step Process:

1. Create an account on the Federal Tax Authority (FTA) portal: https://eservices.tax.gov.ae
2. Log in and access the VAT registration form.
3. Fill in business and contact information.
4. Provide financial details and turnover figures.
5. Upload supporting documents.
6. Submit the application.

Approval Timeline:

• The FTA typically processes VAT registrations within 5–20 business days and issues a Tax Registration Number (TRN).

After Registration: What’s Next?

• Receive TRN: This is your official VAT number used on all tax invoices and correspondence.
• Issue Tax Invoices: Businesses must issue tax-compliant invoices with the TRN.
• VAT Returns: Must be filed quarterly or monthly, depending on the FTA’s assignment.
• Keep Records: Maintain accounting records, invoices, and VAT return submissions for at least 5 years.
• Compliance: Stay up to date with VAT laws to avoid penalties and fines.

Common FAQs

Need Help with VAT Registration?

If you need expert assistance with VAT registration or compliance, contact Capital Zone Accounting & Bookkeeping for professional guidance.