Value Added Tax (VAT), an indirect taxation method, is sometimes referred to as a general consumption tax. In nations where VAT is implemented, it is imposed on the majority of goods and services involved in transactions.
VAT is widely acknowledged as one of the most widespread forms of consumption tax globally. It has been adopted by over 150 countries, including all 29 members of the European Union (EU), Canada, New Zealand, Australia, Singapore, and Malaysia. In certain countries, VAT is known as Goods and Services Tax (GST) or a similar term.
VAT is imposed at every stage of the supply chain, meaning it is charged when goods or services are transferred from one entity to another. While businesses serve as intermediaries in collecting and accounting for the tax, it is ultimately the end consumers who bear the cost of VAT.
When a business collects VAT from its customers, it remits that amount to the government. At the same time, the business may also be eligible for a refund from the government for the VAT it has paid to its suppliers. Consequently, the tax revenues received by the government reflect the cumulative “value added” throughout the entire supply chain.
What Does VAT Registration Mean in the UAE?
VAT Registration in the UAE refers to the process by which a business is officially recognized by the government as a supplier of Goods and Services and is authorized to collect VAT from customers and submit it to the government. Only businesses that are registered for VAT are permitted to:
• Apply VAT on taxable goods and services they provide.
• Claim Input Tax Credit for VAT paid on their purchases, which can be deducted from their VAT liability on sales.
• Make VAT payments to the government.
• Regularly file VAT returns.
In addition to these requirements, all registered businesses must organize their reporting structure in compliance with specific guidelines. This includes maintaining accurate and up-to-date books of accounts, documenting tax-related transactions such as tax invoices, credit notes, debit notes, and keeping records of both inward and outward supplies.
Therefore, having a clear understanding of VAT fundamentals is crucial for businesses preparing for VAT, and obtaining VAT registration is the initial step toward transitioning their operations into the VAT era.
How to initiate VAT Registration in the UAE?
In the UAE, businesses with a turnover surpassing AED 375,000 are required to apply for VAT registration. To facilitate this process, the Federal Tax Authority (FTA) has opened its online portal for VAT registration. Deadlines for registration have been announced by the FTA, and the registration process will be conducted in phases based on business turnover. Understanding the necessary details and steps involved in the online registration process is crucial for businesses seeking VAT registration.
Before starting the online VAT registration process, it is essential to familiarize yourself with the required information and steps. This will enable you to prepare adequately, ensuring a smooth registration process and avoiding unnecessary delays or rejection of the application due to incorrect details.
Here are the steps involved in the online VAT registration process:
1. Creation of an e-Service Account
2. Login to your e-Service Account
3. VAT Registration Form: The online form consists of 8 sections, as outlined below.
Each section requires specific details to complete the VAT registration process: • About the applicant
• Applicant details
• Contact details
• Banking details
• Business relationships
• Details regarding VAT registration
• Review and submission
Who is Required to Register for VAT?
Is every business obligated to register for VAT? No, only businesses that exceed the specified annual aggregate turnover threshold are required to register for VAT. Depending on the registration threshold, a business may be mandated to register, or alternatively, they can choose to apply for registration or seek exemption from VAT registration.
Based on these criteria, VAT registration in the UAE can be categorized into the following:
• Mandatory VAT Registration
• Voluntary VAT Registration
• Exemption from VAT Registration
What are the Deadlines for VAT Registration in the UAE?
In preparation for the implementation of VAT in the UAE on January 1st, 2018, the Federal Tax Authority (FTA) has initiated the process of VAT registration. The FTA has launched an online portal to facilitate businesses in registering for VAT.
T his early opportunity for online registration enables businesses to be well-prepared and ready to apply VAT charges starting from January 1st, 2018. The VAT registration process in the FTA portal is conducted in phases, with the specific timeline depending on the turnover of each business.
How is VAT Turnover Calculated for Registration in the UAE?
In the UAE, businesses that exceed the mandatory registration threshold of AED 375,000 and the voluntary registration threshold of AED 187,500 in annual turnover are eligible to apply for VAT registration.
It is important for businesses to have a clear understanding of the types of supplies included in the calculation of annual turnover and how to accurately calculate the VAT turnover for registration in the UAE.
How to Apply for VAT Group Registration?
In the UAE VAT system, it is generally not permitted for a person conducting business to have multiple Tax Registration Numbers (TRNs), unless specified otherwise in the UAE Executive Regulation. This means that even if your business operates through branches in multiple Emirates, only one VAT registration is required. However, in cases where two or more persons are considered related or associated parties within the business, they are eligible to apply for VAT group registration. This allows them to be treated as a single entity for VAT purposes.