A Comprehensive Guide for VAT Registration in the UAE
The Value Added Tax (VAT) in UAE was introduced on January 1, 2018. This introduction of VAT made a significant impact on the country’s taxation system. There was no taxation policy before 2018 in the UAE, thus, businesses enjoyed the tax-friendly environment of the country. The years of the tax-free lifestyle of the UAE came to an end when the members of the Gulf Cooperation Council (GCC) introduced VAT in the country. This implementation of VAT was initially not taken down well by people but later it was considered as one of the most accurate decisions of the regulatory bodies of the country. In this blog,we aim to make you all aware of everything related to VAT in the UAE.
What is Value Added Tax (VAT) in the UAE?
The Value added tax is a type of indirect tax imposed on goods and services at each level of the supply chain which a consumer pays to the government. It is a multi-staged tax that affects the ultimate consumers of the goods and services. In the UAE, the VAT rate is set at 5%. VAT is not imposed on all types of goods and services rather it is imposed only on selected goods and services whereas the other remains exempted from it. The introduction of VAT played a significant role in boosting the overall revenue of the country. The aim of introducing it was to gain revenue and to decrease the high dependency of revenue from exportation of oil.
Who is required to register for VAT?
If you have an existing company or have recently established one, then you need to figure out whether you are eligible to register for VAT or not.
Below mentioned are the various types of registration that apply to an entity:
Mandatory VAT Registration
As per the regulations laid down by the government of UAE, individuals or entities carrying out business activities in UAE and generating a turnover of more than AED 3,75,000 needs to register for VAT compulsorily.
Voluntary Registration
Businesses that do not meet the minimum threshold of having a turnover of more than AED 3,75,000 can also register for VAT voluntarily.This may be beneficial for businesses aiming to reclaim input VAT on their expenses.
Documents required for VAT registration
The following documents are required for businesses to successfully register for VAT.
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Copy of trade license
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Passport copy of business owner and partners
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Copy of Emirates ID held by owner and partners
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Memorandum of Association (MOA) of the company
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Company contact details
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Bank account details
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The income statement for the last 12 months
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Nature of business and activities performed
How to apply for VAT registration in UAE
Value Added Tax (VAT) registration is a crucial step for businesses operating in the United Arab Emirates (UAE). Whether you're a seasoned entrepreneur or just starting, understanding the process of applying for VAT registration is essential to ensure compliance with the tax regulations. In this comprehensive guide, we will take you through the step-by-step process of applying for VAT registration in the UAE.
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Creation of e-Service Account
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Once the e-Service account is created, login it using your account credentials
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VAT Registration Form: This form contains 8 sections- about, details of the applicant like contact details, banking details, about VAT registration, declaration and review and submit.
Benefits of VAT registration
Since the implementation of VAT, there has been a significant change in the UAE’s economy. The following are the various benefits of VAT registration:
Adherence to Legal Obligations
One of the major benefits of VAT is that it helps the businesses to adhere to the legal obligations. By registering for VAT, companies show that they are committed to operate within the legal boundaries and avoid the penalties and legal consequences that come with non-compliance.
Elevates business reputation
VAT registration helps the businesses to increase their reputation and credibility within the UAE market. This goodwill of the company ensures to attract potential consumers for the business.
Recovery of Input VAT
Only VAT registered companies can claim the input VAT. Thus, the claiming of input VAT is one of the most important benefits of VAT registration.
Categories of Goods and Services which fall under VAT
The government of UAE has set the VAT rate at 5%. This VAT rate is comparatively lesser than other countries, thus, it gives an advantage to the businesses operating in UAE. The goods and services fall under two categories, taxable supplies and exempt supplies.
Taxable Supplies
Goods and services that fall under this category are consumer items, commercial property transactions, jewelry, medicines, stationery, vehicles, electronics and gadgets and second-hand goods. These goods are taxed at a rate of 5 % in the UAE.
Exempt Supplies
The products which fall under this category are healthcare, education, international transport and export etc. These goods and services are exempted from VAT in UAE.
Procedure for tax return filing in the UAE
A VAT-registered company submits a quarterly VAT Return. In order to guarantee compliance with the VAT Laws and lower the possibility of tax evasion, the authority may subsequently request that specific businesses file a return on a monthly basis. Additionally, through unique legal provisions, the UAE VAT law lessens the administrative burden and compliance burden. These laws provide certain businesses an extension for filing their VAT returns. A registered business is required to furnish the information in the VAT Return Format, which has been issued by the UAE VAT Executive Regulations. Since the return filing procedure is conducted online, all VAT-registered companies in the United Arab Emirates submit their returns by signing in to the FTA portal.
Conclusion
VAT has become a crucial component of the UAE’s economy contributing in generating a significant amount of the country's revenue and also influencing how companies run and the way customers interact with them in general. VAT registration elevates a business's reputation and credibility within the UAE market. Our experts will address your VAT-related concerns adeptly, enabling you to focus on your core business activities. If you require assistance with VAT registration compliance or are seeking a VAT refund in Dubai, our team will assist you with every step. Contact us today to get an insightful and detailed knowledge about VAT registration process.
