What is VAT Registration in Dubai, UAE?
Dubai has grown into one of the most business friendly locations in the world at a very fast rate. Having a thriving economy and properly organized tax regulations, it is imperative to know about VAT registration in Dubai when as a business, one wishes to operate in the UAE hence doing so in a legal and efficient way.
Value Added Tax (VAT) was launched in 2018 and is an important element in the economic diversification of the UAE. This system is fair in terms of taxation of goods and services and is also able to retain the popularity of Dubai as an international investment destination.
What is VAT Registration in Dubai, UAE?
VAT registration in Dubai can be described as the official procedure during which a business is registered with the Federal Tax Authority (FTA) to become a VAT-registered company.
Value Added Tax (VAT) is a consumption tax, which is charged at all levels of the supply chain on the value added to goods and services. Though eventually the consumer pays the tax, the collection and remittance of the tax is done by the businesses to the government.
Such a system enhances transparency, fair trade practices and alignment of Dubai with international tax standards.
Who Needs to Register for VAT in Dubai?
Not all businesses in Dubai would need to apply VAT registration – all this is depending on the business size and annual turnover.
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Mandatory Registration
- A business should register VAT in case:
- It has an annual taxable supplies and imports of above AED 375,000 over the last 12 months.
- Or, it is forecasted to surpass AED 375,000 within the upcoming 30 days.
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Voluntary Registration
A business can also choose to voluntarily register VAT in case its taxable supplies or expenses in a year are over AED 187, 500. This may help the new businesses that want to claim back input VAT and develop credibility.
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Non-UAE Established Businesses
Businesses which are not resident and sell taxable goods or services in the UAE should also apply to be registered as VAT regardless of the turnover unless someone else in the UAE takes the tax on behalf of a business.
Step-by-Step Process of VAT Registration in the UAE
Registration of VAT in the UAE is an internet system that is handled on FTA e-Services portal. Here’s a detailed guide:
Step 1: Check Eligibility
Determine whether your business satisfies the registration criterion on your annual taxable supplies and imports.
Step 2: Create an e-Services Account
Go to the official site of Federal Tax Authority (FTA) and register an e-Services account with the use of your business email, phone number and identification.
Step 3: Complete the VAT Registration Form
On logging in, complete the VAT registration form online. You’ll need to provide:
- Company name and number of trade license.
- Contact and business address.
- Bank information (IBAN and account number).
- Financial information (turnover and projected revenue)
Step 4: Upload Supporting Documents
Include the necessary documents, including the copies of trade licenses, identity documents, bank statements, and tenancy contracts.
Step 5: Submit Your Application
Check through and verify your information before handing in. FTA will subsequently check on your information.
Step 6: Receive Your VAT Registration Certificate
As soon as it is approved, you will be issued with a VAT Registration Certificate of your Tax Registration Number (TRN), date of registration and schedule of VAT filing.
Documents Required for VAT Registration in Dubai
Corporations that seek to register VAT in Dubai are required to provide a number of documents that will be verified. The documents that are usually needed are:
- Valid Trade License copy
- Emirates ID and passport copies of owners or partners.
- Memorandum of Association of the company (MOA).
- Past 12 months financial statements.
- Information on bank accounts and most recent bank statements.
- Contract of business premises lease or tenancy.
- Examples of sales and purchase invoices.
- Registration certificate of customs (where necessary)
- Import/export business Customs declarations.
- Provision of proper documents will guarantee quick approval.
How to File and Pay VAT in the UAE
Upon registration, the businesses must collect VAT on the taxable supplies and keep accurate accounting records and submit periodical VAT returns.
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Calculate Your VAT
Calculate your VAT liability by use of the following formula:
Output VAT (on sales) -Input VAT (on purchases) = VAT Payable to FTA.
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File VAT Return
VAT returns are usually submitted on a quarterly basis through e-Services portal of the FTA. Included all the necessary financial information, TRN, and VAT.
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Pay VAT Amount
Once the filing is made, it is possible to pay the due VAT online or at qualified UAE banks. The payment should be made in a 28-day period after the expiry of tax period.
The consequences of missed filing or payment on time can be fines.
Cost of VAT Registration in the UAE
The registration fee of acquiring a VAT registration certificate is very low. The FTA usually costs approximately AED 500 to be registered thus the process is affordable to most businesses.
Recent VAT Rule Changes in the UAE (2023 Update)
By March 1, 2023, all businesses in the UAE are required to voluntarily reveal any mistake made in the VAT returns, irrespective of their value.
Earlier, only such errors that were above AED 10,000 were to be disclosed. But in the new rule even minor discrepancies have to be reported. The update focuses on transparency and strengthens the determination of the UAE to report tax correctly.
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