What is Value Added Tax in the UAE?
VAT Registration in the UAE: VAT (Value Added Tax) is a type of indirect tax. It’s sometimes referred to as a kind of universal consumption tax. A VAT is levied on most purchases and sales of goods and services in a nation that has one.
VAT is also a sort of consumption tax that may be found all around the world. Over 150 nations, including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore, and Malaysia, have introduced VAT (or its counterpart, Goods and Services Tax).
Each stage of the “supply chain” is subject to VAT. The VAT cost is usually borne by the final customer, while companies collect and account for the tax, thereby functioning as a tax collector for the government.
A company pays the government the tax it receives from consumers, and it may obtain a return from the government on the tax it pays to its suppliers.
As a result, the “value add” along the supply chain is reflected in tax collections to the government. The following is a simple, illustrated illustration of how VAT works (based on a 5% VAT rate):
VAT Registration in the UAE -Who needs to register for VAT in the UAE?
If a company’s taxable supply and imports surpass the statutory registration level of AED 375,000, then they must register for VAT.
Furthermore, if the total amount of a company’s taxable supply and imports (or taxable costs) exceeds the voluntary registration level of AED 187,500, then the company may opt to register for VAT voluntarily.
Registrations are of two types
Mandatory Registration
Over the past 12 months, the total value of its taxable supplies and imports exceeded the statutory registration level, or
In the following 30 days, the total value of the company’s taxable supplies and imports is expected to reach the necessary registration level.
AED 375,000 is the obligatory registration requirement. This criterion does not apply to overseas companies.
Registration Voluntarily
In the preceding 12 months, the total amount of its taxable supply, imports, or taxable costs exceeded the voluntary registration level, or
In the next 30 days, the total amount of the company’s taxable supply, imports, and taxable costs are expected to reach the voluntary registration level.
AED 187,500 is the voluntary registration barrier.
What do you mean by Taxable supplies in UAE VAT?
A taxable supply is a supply of goods or services produced by a business in the UAE that may be taxed at a rate of either 5% or 0% to determine whether a registration requirement exists.
If a supply of such goods or services would be taxed if made within the UAE, imports are also taken into account for this reason.
Registered Business paying VAT
They must charge VAT (Value Added Tax) on taxable products and services they provide.
• They are entitled to a refund of any VAT (input tax) paid on business-related items or services.
• Maintain a variety of company documents that will allow the authorities to verify that everything is in order.
- In case your company is VAT-registered, you must declare the amount of VAT you charged and the amount of VAT you paid every month to the government. It will be an official submission, and the reporting will most likely be done online.
- You must pay the government the difference if you charged more VAT than you paid.
- In the real estate industry, there is a VAT.
- The VAT treatment of real estate is determined by whether the property is commercial or residential. Commercial property supplies (including sales and leases) are subject to the regular VAT rate (i.e., 5 percent ).
- Residential property supplies, on the other hand, are normally VAT-free. This guarantees that VAT is not an unrecoverable expenditure for people who purchase their own homes. The initial delivery of residential homes within three years after completion at the time of VAT introduction is zero-rated to guarantee that real estate developers may collect VAT on residential property construction.
- Sectors with a zero rating
The following key types of supplies will be subject to a 0% VAT charge:
- Exports of products and services to countries beyond the Gulf Cooperation Council
- Transportation and related supplies on a global scale
- Certain sea, air, and land modes of transportation (such as planes and ships) are in short supply.
- Precious metals of investment-grade (e.g., gold, silver, of 99 percent purity)
- Residential properties that are newly developed and supplied for the first time within three years after their completion.
- Provision of some educational services, as well as the provision of related goods and services
- Provision of specific healthcare services, as well as the provision of related goods and services
- Sectors free from VAT
- VAT exemption will be granted to the following types of goods and services:
- The provision of certain financial services (clarified in VAT legislation)
- Residential real estate
- Undeveloped land
- Passenger transportation inside the city
VAT Registration for Non Residents
Non-residents should be aware that there is no registration threshold in the UAE. Non-residents must register for VAT as soon as they supply goods or services in the United States unless the client is compelled to account for the VAT under the reverse charge.
VAT Group Registration in the UAE
By creating a VAT group, two or more legal persons with adequate financial, economic, and regulatory ties can seek to become a single taxable person. The following are the prerequisites and requirements for registering as a VAT group in the UAE:
- The Legal Persons seeking for VAT group registration are either incorporated in the UAE or have a regular presence there.
- They are family members.
- One or more people are in charge of the others.
The VAT group’s representative members can be any of the VAT group’s members and must be nominated by the group. On behalf of the VAT group, the representative member is responsible for all applications to FTA. Any notification received by the representative member, on the other hand, affects all VAT group members.
Exceptions in the case of VAT Registration in the UAE
If a taxable person’s yearly turnover is entirely made up of supplies taxable at the zero rate of VAT, they may be exempt from necessary registration.
A request for such an exemption must be submitted to the FTA. If FTA determines that the conditions for an exemption from registration apply, it will either provide a notification to the applicant confirming the applicant’s exclusion from registration or inform the applicant of his or her registration.
However, If the applicant’s circumstances change in the future and it makes standard-rated taxable supplies or receives supplies on which VAT is payable in the UAE, it must inform FTA within 10 business days after making or receiving the taxable supply, and it will be registered for VAT.
What FN Consultants can do for you ?
We (FN Consultants ) are the Tax expert in the UAE and we assist companies with VAT Registration in the UAE, VAT Quarterly filing, VAT Consultancy, Accounting, and Bookkeeping, Auditing, business formation, etc.. .for more information contact us.
VAT related FAQ
Who needs to register for VAT in the UAE?
A business that has an annual turnover of AED 375,000 or more per year is compelled to register for VAT in the UAE. in addition its optional for businesses having a turnover of AED 187,500 to 375,0000 per year to register for VAT.
How to register for VAT in the UAE / What is the procedure for VAT registration in the UAE ?
It’s a bit complicated process to register for VAT in the UAE. However, you can follow the below steps :
- First go to Federal Tax Authority’s online portal
- Sign up for a new account
- Begin your registration process as guided by the Federal Tax Authority in the official website
- finally submit your application with relevent details
- The application will go pending , if all the necessery documents are provided your TRN (Tax registration Number ) will be issued with in 20 business days. In case FTA needs some more information the submitted application will be changed in to ‘Resubmit’ status.
Is a company bank account is mandatory for VAT registration in the UAE?
Is a company bank account is mandatory for VAT registration in the UAE? the short answer is YES. Bank details in the name of the company are now mandatory for VAT Registration in the UAE.