The UAE first introduced Value Added Tax (VAT) at the beginning of 2018 as part of the GCC agreement to diversify government revenues and reduce dependency on oil income. This indirect tax is levied on the supply of goods and services and applied at every stage of the supply chain, which ultimately helps fund and maintain crucial high-quality public services such as education, healthcare, and infrastructure. As of 2024, the standard VAT rate in the UAE stands at 5%, with specific exemptions for certain goods and services.
For businesses, VAT adds a new layer of compliance and administrative requirements, particularly as regulations continue to evolve. In this comprehensive guide, we will examine the intricacies of VAT registration in 2024 in the following sections:
- Who is eligible for VAT registration in the UAE?
- VAT registration UAE: step-by-step
- Documents required for VAT registration in the UAE
- What happens if you don’t register for VAT in the UAE?
- Why work with Creative Zone?
Who is eligible for VAT registration in the UAE?
In the UAE, VAT registration requirements are carefully designed to cater to businesses of various sizes and sectors, ensuring comprehensive compliance. As of the amendments implemented in early 2023, here’s a breakdown of who needs to register:
Mandatory registration: Businesses whose taxable supplies and imports exceed AED 375,000 per year must register for VAT. Additionally, businesses anticipating exceeding this threshold within the next 30 days are also required to register promptly.
Voluntary registration: Businesses with taxable supplies and imports below the mandatory threshold but ranging between AED 187,500 and AED 375,000 have the option to voluntarily register. This enables them to reclaim VAT on business expenses, enhancing financial management and competitiveness.
However, certain exemptions may apply based on specific business activities. Businesses may be exempt from VAT registration if all their supplies are zero-rated or they no longer make any supplies other than those zero-rated. Certain sectors in the UAE benefit from VAT exemptions to streamline operations and maintain clarity in compliance.
Currently, there are several types of supplies charged at different rates in the UAE:
- Standard-rated supplies: Goods and services subject to a 5% VAT rate include a wide range of consumer and business transactions within the UAE.
- Zero-rated supplies: Supplies with a 0% VAT that allow businesses to claim relevant input tax. Examples include certain education services, healthcare supplies, goods and services exported outside the GCC, and precious metals like gold and silver.
- Exempt supplies: Supplies that neither charge VAT nor allow for input tax recoveries, such as residential properties, undeveloped lands, public transport services, life insurance, and certain financial services.
- Deemed supplies: Transactions that require VAT charging, such as the sale of business assets without consideration, transfer of business assets between UAE and other GCC Implementing States, and goods used for non-business purposes where input tax was claimed.
- Out-of-scope supplies: These supplies fall outside the scope of UAE VAT law, ensuring they are not subject to VAT regulations set by the FTA.
Understanding these categories helps businesses navigate VAT obligations effectively, ensuring compliance while managing operational costs and financial resources efficiently.
VAT registration UAE: step-by-step
VAT registration can quickly become confusing, but our experts are always on hand to help simplify the process. To give you an idea of what to expect, here is a simplified five-step guide to VAT registration:
Step 1: Create an e-services account
To start the VAT registration process, visit the Federal Tax Authority (FTA) website and create an e-Services account. This account is essential for accessing the VAT registration form and managing your tax affairs electronically.
Step 2: Complete the registration form
Fill out the VAT registration form accurately, providing comprehensive details about your business activities, turnover, and contact information. It’s crucial to ensure all information submitted is correct to avoid delays in the registration process.
Step 3: Submit the required documents
Gather and upload the necessary supporting documents as per FTA requirements and ensure these documents are clear and valid. We will explore specific documents later in this article.
Step 4: Receive your TRN (Tax Registration Number)
Once you have submitted your application and supporting documents, the FTA will review your registration. Upon successful verification, you will receive a Tax Registration Number (TRN) via email. The TRN is a unique identifier issued to registered businesses for all VAT-related transactions.
Step 5: Start issuing tax invoices
Once registered, your business is obliged to comply with VAT regulations, including the issuance of tax invoices. Ensure that all invoices issued display your TRN, as mandated by the FTA. This helps in transparently documenting VAT transactions and facilitates smooth interaction with suppliers and customers. Remember, you will need to keep detailed records of all VAT-related transactions, invoices, and correspondence with the FTA to facilitate audits and compliance checks.
This may sound complicated, but there are ways to simplify the process. To ensure your business is VAT compliant and meets all the requirements, you can outsource your tax and accounting needs to a reputable agency, such as Creative Zone, to help.
Documents required for VAT registration in the UAE
To complete your VAT registration process, you will need to prepare the following documents:
- Trade license
- Passport copies of shareholders
- Emirates ID copies of shareholders
- Financial statements
- Bank account details
- Proof of business address
Ensure all documents are clear, valid, and in compliance with the FTA’s requirements to avoid delays in the registration process. The team at Creative Zone can provide a handy checklist to ensure you have all of your documents to expedite the process.
What happens if you don’t register for VAT in the UAE?
Failure to register for VAT or comply with VAT regulations in the UAE can result in significant consequences, including:
Financial Penalties: Fines may be imposed for non-registration or late registration.
Legal Liabilities: Non-compliance with VAT regulations can lead to legal actions and restrictions on business activities.
Reputational Damage: Failure to comply with tax obligations can damage your business’s reputation and affect customer trust.
The penalty or fine depends on the nature of the offence. For instance, failing to issue a tax invoice, credit note or document during a supply will result in an AED 5,000 fine for each missing document, while tax evasion will result in a fine costing 300% of the tax evaded.
To avoid these consequences and maintain your business’s operational continuity, it is crucial to adhere to VAT requirements and to stay up to date with the latest regulations.
Why work with Creative Zone?
At Creative Zone, we are your trusted partner in navigating VAT registration and business setup in the UAE. With years of experience, we understand the intricacies of UAE regulations, including VAT. Our team of experts is dedicated to providing comprehensive support, with personalised guidance tailored to your business needs, ensuring efficient and compliant VAT registration.
We offer end-to-end support, too, from initial consultation to post-registration support, assisting you at every step of your business journey. With our knowledge and expertise, you can focus on your core business while we handle the complexities of VAT registration and compliance.
Contact Creative Zone today to kickstart the VAT registration process in the UAE with confidence. Our team of experts is ready to assist you and ensure the process is as smooth and seamless as possible.
