Dubai is known the world over as one of the foremost business hubs of the Middle East. Its stellar reputation as an entrepreneur- and investor-friendly city is the reason why, even during the pandemic, thousands of new companies are being formed regularly each month. This is because the UAE government has done, and continues to do, an excellent job at containing the pandemic to ensure the safety of all those residing in, and visiting, the UAE. The government also introduced several extensive stimulus packages to support UAE businesses impacted by the pandemic.
If you are a new entrepreneur seeking UAE VAT registration services in Dubai, it is important that you learn whether your business is eligible or required to apply for VAT in the UAE. You must also understand the different types of VAT registration services in the UAE. The Federal Tax Authority is the government body responsible for implementing VAT. It has specified certain eligibility criteria that new businesses must satisfy to apply for VAT registration services in Dubai.
VAT in the UAE
VAT or Value Added Tax is an indirect tax imposed on the sale of goods and services. One of the most common types of consumption tax, VAT has been adopted by over 150 countries across the globe. In the VAT collection process, it is the final consumer in the supply chain that usually bears the VAT cost.
In the UAE, VAT was introduced on January 1, 2018 and is also levied on imports of goods and services. Once you complete your VAT registration process in UAE, you will act as the tax collector on behalf of the Federal Tax Authority (FTA), collect the tax from your end consumers, and pay it to the government. Your business can also claim a refund from the government for the tax you have paid to your suppliers.
VAT for UAE Businesses
Businesses in the UAE that deal in taxable goods and services must register for VAT. Whether your company engages in trade on UAE mainland (onshore) or in UAE free zones, you will have to apply for VAT registration services in UAE, if you meet the eligibility criteria set by the FTA.
As per the Federal Tax Authority, ‘A VAT registration covers ALL of the business activities undertaken by the registered person.’
It is mandatory for your Dubai business to have a Tax Registration Number (TRN) to comply with the UAE VAT laws, if the UAE business qualifies for VAT mandatory registration threshold. A Tax Registration Number is a unique 15-digit number assigned to a vendor or business, by the Federal Tax Authority, that registers for tax purposes in the UAE. The TRN is issued once you complete your UAE VAT registration process. The TRN is important because it –
- acts as a proof of your established and operative business status
- allows you to claim input VAT on your business expenses and apply for VAT refunds
- facilitates VAT returns filing
- allows the business to collect UAE VAT on sales and pay to the UAE government
- is as per UAE VAT laws and regulations
Types of UAE VAT Registration Services in Dubai
The Federal Tax Authority’s VAT eligibility criteria are dependent on a company’s annual revenue and annual taxable expenses.
There are two types of VAT registration services in the UAE:
- Mandatory VAT Registration
- Voluntary VAT Registration
Mandatory VAT Registration in UAE
It is applicable on individuals or companies that have an annual turnover of AED 375,000 or more. If your business falls in this category, you are required to get a Tax Registration Number (TRN) to conduct your business in the UAE. You can then implement VAT on your supplies and collect VAT on behalf of the FTA.
You are eligible to apply for Mandatory VAT Registration if you satisfy either of the following criteria:
- Your business turnover and imports were more than AED 375,000 during the last 12 months
OR - You anticipate that your business turnover and imports in the next 30 days will be more than AED 375,000
Voluntary VAT Registration in UAE
It can be applied by individuals or companies that have an annual turnover of more than AED 187,500 but less than AED 375,000. If your business falls in this category, you may apply for VAT registration and get a TRN, voluntarily. Should you choose to not register for VAT, you will not be fined, nor will you face any legal issues.
You are eligible to apply for Voluntary VAT Registration if you satisfy either of the following criteria:
Your business turnover or taxable business expenses or imports were more than AED 187,500 in the last 12 months
OR
- You anticipate that your business turnover or taxable expenses or imports in the next 30 days will be more than AED 187,500
Here is a quick comparison between the two types of VAT registration services in UAE that are based on annual turnover.
| MANDATORY VAT REGISTRATION | VOLUNTARY VAT REGISTRATION |
| Registration threshold is AED 375,000 | Registration threshold is more than AED 187,500 but less than AED 375,000 |
| It is mandatory | It is optional |
| Applicable if last 12 months’ turnover or imports were or exceeded AED 375,000 | Applicable if last 12 months’ turnover or taxable expenses or imports exceeded AED 187,500 |
| Applicable if your turnover in the next 30 days is expected to be more than AED 375,000 | Applicable if your turnover in the next 30 days is expected to be more than AED 187,500 |
| Non-registration within stipulated time will result in payment of fine | No fine or penalty associated with non-registration |
VAT Fines in UAE for Non-Registration
UAE VAT Law requires that any business eligible for mandatory VAT registration must get themselves registered within the time frame specified by the FTA. Failure to do so will result in fine for non-compliance of procedure.
If your business meets or exceeds the mandatory VAT registration threshold, you have 30 days from reaching the turnover limit, to register for VAT and obtain a Tax Registration Number. If you fail to register within these 30 days, your business will have to pay a late registration fine of AED 20,000.
VAT Registration in UAE for International Companies
If you are a non-resident of the UAE, that is, if you do not have a place of establishment or fixed establishment in the UAE, and your company is based outside the UAE, your business is categorised as an international company or foreign or non-resident business.
As an international company, if you sell or expect to sell your goods or services in the UAE, and there is no other person who accounts for the VAT due in the UAE on your behalf, then you are required to register for VAT and get a Tax Registration Number.
VAT Registration for Amazon Sellers in UAE
If you are a vendor or a business located outside the UAE and want to sell your products or services in the UAE through e-commerce platforms such as Amazon and Noon, you must register your company with the FTA before you start selling online in the UAE.
As a vendor on Amazon or Noon, you can start selling only after completing your VAT registration process in UAE and getting your TRN. If you register your business after making sales, your business will incur a hefty penalty. Also, the condition of a minimum turnover does not apply to these platforms.
Conclusion
When starting a new business in Dubai, there are many factors to consider before applying for VAT registration services. For in-depth discussion about how to register your company for VAT in UAE, what are the exemptions for UAE VAT registration, or to learn how Shuraa can help you with your VAT registration requirements in UAE, VAT compliance, and VAT refund processing connect with us today. Start today! Book your FREE VAT consultation with our VAT & tax experts.
Since 2001, Shuraa Group has helped over 35,000 local and foreign entrepreneurs with customised Dubai company formation solutions, specific to their business needs. In addition to UAE company registration and VAT & accounting services, we also offer business centre and office solutions, Dubai bank account opening assistance, and reliable corporate sponsorship, among many other services.
You can get in touch with us on +97144081900, +971506923280. You can also send us an email at [email protected] with your enquiry about UAE VAT registration services in Dubai.
Author
Hassan Sheikh
UAE VAT Expert/Tax Consultant
