​VAT Registration for Business Entities / Individuals – Single registration
The UAE implemented Value Added Tax (VAT) on January 1, 2018. This transaction-based indirect tax is applied at every stage of the supply chain and is eventually borne by the end consumer. In other words, VAT is a consumption tax imposed on the value added at every step of the supply chain.
Rates of VAT in UAE: The standard VAT rate in the UAE is 5%. Some goods and services are exempt or zero-rated.
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Zero-rated tax under UAE VAT law refers to a special tax treatment where a VAT rate of 0% is applied to certain goods and services. This means that although VAT is applicable the tax rate charged is zero, resulting in no additional cost to the consumer.
This provision is designed to support specific sectors such as exports, international transportation, Education Services, and certain essential commodities like medical & healthcare goods, making them more competitive in global markets and easing the financial burden on consumers for vital goods and services.
Exempted goods under the UAE VAT law refer to specific categories of products that are not subject to the standard Value Added Tax (VAT) rate of 5%. These goods are exempted from VAT, meaning that no VAT is applied to their supply. Exempted goods are often essential items or services that are intended to remain more affordable for consumers.
The key difference between zero rate supplies and exempt supplies is that the suppliers of zero rated goods and / or services can still reclaim/refund all their input VAT. But the suppliers of exempt goods are either not registered for VAT or if they are, they cannot reclaim their input VAT.
Who is Obliged to register for VAT in UAE?
Registration requirements apply to any natural or legal person conducting business in the UAE, even if the person has no trade license.
UAE-based businesses that conduct taxable transactions in the UAE are obligated to register for VAT if the total value of their taxable supplies and imports in the preceding 12 months has surpassed or is anticipated to exceed within the next 30 days, the obligatory registration threshold of AED 375,000.
Foreign businesses operating in the UAE and carrying out taxable transactions must also undergo mandatory VAT registration, regardless of the value of their taxable supplies and imports. This requirement is applicable when there is no other entity responsible for settling the corresponding tax on these transactions within the UAE.
Who can choose Voluntary registration for VAT in the UAE?
UAE-based businesses that provide taxable supplies in the UAE may voluntarily register for VAT if the cumulative value of their taxable supplies and imports or taxable expenses, incurred in the last 12 months exceeded or is expected to exceed in the next 30 days, the voluntary registration threshold of AED 187,500.
No Requirement for VAT Registration – Who all?
Business Entities or individuals are ineligible to undergo VAT registration if the total value of their taxable supplies and imports has remained below the threshold of AED 187,500 in the preceding 12 months or if there is no anticipation of exceeding this threshold within the forthcoming 30 days.
VAT Registration for Business Entities / Individuals – Tax Group Registration
VAT Group Registration in the UAE refers to a mechanism that allows related businesses to be treated as a single taxable entity for Value Added Tax (VAT) purposes. Under this arrangement, eligible businesses within the group consolidate their financial and operational activities for VAT reporting, essentially streamlining the compliance process.
Key Points to Consider Regarding VAT Group Registration:
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Eligibility:
Businesses interested, in VAT Group Registration, must meet criteria as outlined by the Federal Tax Authority (FTA) of the UAE. In general, these businesses should have a relationship, interdependence and be controlled by the same entity or group.
Single Entity:
Once registered as a VAT group the member businesses are considered as a single entity. This means that they file a single VAT return where all the transactions of the group members are consolidated.
Shared Responsibilities:
The responsibilities related to VAT liabilities, input tax recovery and other VAT obligations are shared among all the members of the group as one entity. This arrangement has benefits of enhancing tax management and optimization strategies.
Common Input Tax:
The input tax (VAT paid on purchases) from one member can be offset against the output tax (VAT collected on sales) of another member within the group. This allows for the optimization of VAT payments.
Registration Process:
To become a VAT group, eligible businesses need to apply to the FTA, providing necessary information about the group structure, relationships, and member businesses.
Joint and Several Liability:
It's important to note that all members of a VAT group share joint and several liabilities, for any VAT-related liabilities incurred by the group. This implies that if one member fails to meet their obligations then all other members within the group are held accountable as a whole.
Benefits of VAT Group:
Registering as a VAT Group can streamline duties, compliance expenses and potentially improve cash flow management for the businesses involved.
Change of Circumstances:
Any changes in the group composition or structure should be reported to the FTA. This includes adding or removing group members.
Approval Process:
The FTA reviews the application and assesses its eligibility before approving or declining the VAT Group Registration.
When to apply for VAT amendment Application?
Individuals or companies registered for VAT are required to update their VAT registration application within 20 working days from the occurrence of any modifications in their tax records. These changes include alterations in banking information, authorized signatory details, company name or address adjustments, modifications in the company's group structure, a transition from group VAT registration to individual VAT registration, and similar updates.
When to apply for VAT De-registration?
VAT De-Registration refers to the cancellation of a VAT Registration or Tax Registration Number (TRN). A VAT-registered entity must initiate VAT De-Registration within 20 business days upon the occurrence of any of the following events:
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The registrant ceases to engage in taxable supplies.
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The company continues taxable supplies, but its value of supplies or taxable expenses in the past 12 calendar months falls below AED 187,500.
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Also, the FTA is satisfied that his supplies or taxable expenses are not expected to exceed the above-mentioned threshold over the next 30 days.