A Complete Guide on UAE VAT Registration Services in Dubai
Over the last 3 decades, Dubai and Abu Dhabi have built a reputation extraordinaire for successfully becoming the nexus of business activities in the Middle East. Its immaculate record of being one of the most entrepreneur- and business-friendly environments is one of the reasons why the twin cities continue to see increased rates of business activities, even in the wake of the COVID-19 pandemic.
The UAE govt. has been indefatigably working towards making the environment more conducive to business setup and company formation, by carrying out the rigid implementation of social distancing protocols.
If you just started your business or are on the way to conducting a new business setup in Dubai, it is important to find out if you must seek the help of UAE VAT registration services in Dubai.
What is Value Added Tax (VAT)?
Simply put, VAT is a type of indirect tax — like many other excise taxes — that is imposed on the sale of goods and services. VAT is one of the most common types of consumption tax that has been adopted by over 150 countries worldwide. In the whole chain of VAT collection, it is the end user that usually bears the whole cost of VAT.
Introduced in January 1, 2018 in the UAE, the VAT implementation is overseen by the Federal Tax Authority. The FTA has specified a set of criteria that business owners must satisfy before applying for VAT registration services in Dubai.
What VAT Means to a Business Owner
As a general rule, businesses that deal with taxable goods and services are eligible for VAT. While conducting a Dubai business setup, if you meet the eligibility criteria for VAT, you are liable to pay VAT and seek VAT registration services in UAE, regardless of your company’s location: in Mainland or Free Zone.
To quote the FTA verbatim, “A VAT registration covers all of the business activities undertaken by the registered person.”
As a Dubai business, it is required by law for you to have a Tax Registration Number (TRN) to comply with the UAE VAT rules and regulations if your business fulfils the mandatory VAT registration criteria.
What is Tax Registration Number (TRN)?
A TRN is a unique 15-digit number assigned by the Federal Tax Authorities to a business or vendor for tax registration purposes. A TRN will be issued on the completion of your VAT registration process.
Why TRN is Important
- TRN is a proof of your business establishment
- It follows the UAE VAT laws and regulations
- It administers VAT Returns filing
- TRN allows businesses to collect UAE VAT on sales on behalf of the FTA and enables them to pay it to the UAE govt
- It enables you to apply for VAT refunds and input VAT on your business expenses
Types of UAE VAT Registration Services in Dubai
The VAT eligibility criteria is dependent on a company’s annual revenue and annual taxable expenses. With that said, there are two types of VAT registration services in UAE:
- Mandatory VAT Registration
- Voluntary VAT Registration
Mandatory VAT Registration
A mandatory VAT registration is levied on those Companies or individuals whose annual turnover is AED 375,000 or more. If your business falls under this category, you must get a Tax Registration Number (TRN) in order to conduct your business in the UAE. After acquiring a TRN, VAT will be implemented on your supplies, after which, you can collect VAT from your customers on behalf of the Federal Tax Authority (FTA).
Mandatory VAT Registration is incumbent upon you if you satisfy either of the following criteria. So before you conduct a new business setup in Dubai, understand that:
- If your business turnover over the last fiscal year (last 12 months) was AED 375,000 or more.
Or,
- If you anticipate your business imports and turnovers in the next 30 days to be more than AED 375,000.
Voluntary VAT Registration in UAE
Business owners and individuals have the option of voluntarily applying for VAT if their annual turnover is between AED 187,500 and 375,000. If your business satisfies this criterion, you can get a TRN and apply for Voluntary VAT Registration.
If you choose not to register for Voluntary VAT, you will not be fined nor will you face any legal consequences.
The criteria under which you are eligible to apply for Voluntary VAT Registration:
- If your annual turnover or imports or the taxable business expenses were more than AED 187,500 in the last fiscal year (last 12 months)
Or,
- If you expect your business turnover or taxable expenses in the next 30 days to be over AED 187,500
A Brief Comparison
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VAT Fines in UAE for non-registrants
The UAE VAT law mandates all businesses that fall within the respective VAT categories to register within the timespan set by the FTA. Failure to do so will incur a heavy mulct.
After you carry out your business setup in Dubai, if your business meets or exceeds the mandatory VAT registration limit, you will have exactly 30 days to register for VAT and acquire a Tax Registration Number (TRN). Failure to register within these 30 days will attract a fine of AED 20,000 as a late registration fine.
VAT Registration in UAE for International Companies
International Company
Definition: Your company is deemed as international if you do not have a place of establishment or a fixed establishment in the UAE.
As an international company, if you do not delegate anyone to collect the VAT of the goods or services you sell in the UAE, then you are required to register for VAT and get a Tax Registration Number.
VAT Registration for E-Commerce Retailers in UAE
If your business is located outside the UAE and you want to sell your services or products on e-commerce platforms like Amazon and Noon, you are required to complete your VAT registration process in UAE and acquire your TRN number.
NOTE: The provision of minimum turnover is not applicable on these online platforms.
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