VAT Registration UAE in 2021 - A Step by Step Guide

Ever since the UAE introduced Value Added Tax (VAT) on January 1, 2018, business owners are expected to comply with the formalities including tax filings and VAT registrations. Businesses in UAE must ensure that the VAT is properly collected and accounted for to be paid to the Federal Tax Authority (FTA).VAT registration indicates that your company is acknowledged and authorized by the government to collect VAT from your customers and then remit it to the government. 

It is crucial that as a business owner you are aware of all key components of VAT in the UAE. 

Here is our quick step-by-step guide to it. 

What is VAT?

VAT is a tax on the transactions of goods and services, applied at each stage of the supply chain and is based on the value-added at each stage. It is an indirect tax imposed by the Government of UAE, at a nominal rate of 5% on a majority of goods and businesses. Food items, education, and healthcare services are exempted from VAT.  

VAT Registration UAE

Whether or not you should register for VAT depends on the annual turnover of your company. 

Once your UAE VAT registration is approved, your registered business will be given a unique tax registration number (TRN). All VAT invoices will display the TRN. 

UAE mainland businesses and free zone companies are equally subject to VAT. Only ‘designated zones’ that are defined by the UAE Cabinet are outside the purview of UAE VAT taxation. The movement of goods between such designated zones is tax-free.

Typically takes 3 to 5 days for the VAT registration to be complete. 

VAT Return Filing

VAT registered businesses (taxable persons) are required to file a VAT return each year to FTA. 

A VAT return sums up the purchases and supplies made by a taxable person during the tax period in order to determine VAT liability.

You can file your VAT return online every month or every quarte by visiting FTA’s official website -  https://www.tax.gov.ae/ 

You should file returns on time and typically within 28 days of the tax period deadline. A 'tax period' is the period during which tax is due and payable. In general, the tax period is:

• Monthly for businesses with an annual turnover of Dh150 million or more.

• Quarterly for businesses with an annual turnover below Dh150 million 

VAT Liability

Unlike other business revenue, VAT collected from customers does not form part of your business income. The VAT collected is referred to as VAT liability and needs to be remitted to the government of UAE.

Vat liability represents the difference between the output tax payable (VAT charged on supplies of goods and services) and the input tax (VAT incurred during purchases) recoverable for a particular tax period.

If output taxes exceed input taxes, they must be remitted to FTA. In the case of excess input tax over output tax, the taxable person will recover the excess and set it off against future payments due to FTA.

Documents Required for VAT Registration in UAE

You will have to furnish copies of the following documents for VAT registration

• Registration certificate or certificate of incorporation;

• Trade license

• Passport and visa or Emirates ID of director/manager 

• The partnership agreement, memorandum of association, or any document that provides business ownership information;

• Profile of appointed company director;

• Bank account details;

• Contact details;

• Physical office location;

• List of other partners or business directories in the UAE for the past five years

The Federal Tax Authority would also require a declaration of the following:

• Estimated or actual financial transaction values;

• Applicant’s registered business activities;

• Details on the expected turnover of the business for the following thirty days;

• Turnover of the business for the past twelve months (supporting documents are needed);

• Details on the business’ expected exempt supplies;

• All information regarding the business’ imports and exports;

• Details on customs registration;

• The business activities in the GCC

A taxable person or VAT-registered business is also expected by the tax authority to keep the following documents/records:

• All tax invoices or any alternative document that is relevant to receiving goods or services;

• Tax credit notes, as well as any alternative document received by the business related to the purchase of goods or services;

• Records of taxable supplies received or made;

• Tax invoices and any alternative document that is issued related to goods or services;

• Tax credit notes, as well as any alternative document that is issued for goods or services;

• Records of goods or services disposed of or utilized by the business for matters that are not related to th4e business, as well as taxes paid for such;

• Record of imports and supplies of goods or products;

• Records of corrections or adjustments that are made to tax invoices or any account;

• Records of goods or products that are exported to any foreign country

Tax records have to be kept by a taxable person, which includes the following information:

• Recoverable tax on imports or supplies;

• Recoverable tax after adjustment or error correction;

• Due tax after an adjustment or error correction;

• Due taxes on all taxable supplies

VAT Registration Process

Once you have the soft copies of the above-mentioned documents ready, you are ready for the registration process. 

First off, 

• Register at e-service and create an account

• Fill up the online VAT registration form

FTA (Federal Tax Authority) approved e-service account is mandatory for VAT registration. You can easily create one from their official site.      

VAT Rates in UAE

The VAT rates in UAE vary from product to product. The government’s standard rate is 5% and you should charge that amount unless the product or services falls under the “zero-rated” or VAT exemption. 

Zero rates are applicable on goods that are otherwise taxable however the end customer does not pay VAT. Your VAT account should record and report the zero-rated VAT transactions as well.  Certain products and services including residential buildings, land, and financial services are exempted from VAT. 

FAQs

1. Is VAT registration mandatory in UAE?

No, VAT registration is not mandatory for all the business. If the value of your taxable supplies exceeds Dh375,000 in a given year, VAT registration is mandatory. 

2. How long does VAT registration take in UAE?

After filling up your VAT application, it typically takes around 3 to 5 days. 

3. Who is exempted from VAT in UAE?

Supplies of residential properties, bare land, some financial services, and local passenger support are generally exempt from VAT

4. What is a taxable supply under UAE VAT?

Taxable supplies are those on which VAT at the standard rate of 5% is levied.

5. Is VAT applicable on delivery charges in UAE?

According to UAE VAT law, VAT is due on charges incurred for goods delivered from one place to another.