VAT threshold is the limit of supply value over which businesses in the UAE need to register for VAT and pay taxes. However, many businesses are struggling to calculate their VAT eligibility based on the threshold. In order to determine whether the value of your taxable supplies has exceeded the VAT registration threshold limit (mandatory or voluntary), the following things need to be considered.
1. The value of taxable supplies
2. Value of imports
3. The value of reverse charge supplies
Table of Contents
Things to Consider
Calculating the value of Taxable Supplies
This will include all the supplies you made from or within the UAE on which VAT is applicable at 5% rate. This also includes zero-rated supplies. However, this doesn’t include VAT exempted supplies.
Taxable supplies = 5% VAT eligible supplies + exports or zero-rated supplies
Calculating the value of reverse charge supplies
Reverse charge supplies are the ones on which VAT is paid by the buyer or the recipient of the supply directly to the government, instead of paying it through the supplier. These supplies are considered while calculating the VAT registration threshold.
The value of Imports
A UAE business also needs to consider the value of taxable goods/services imported by him/her on which VAT is applicable.
Calculation of VAT Threshold Limit
Once you have all the required data, you can start calculating the VAT turnover threshold to find out your VAT eligibility.
Let’s assume your business makes supplies to local citizens in the UAE. You also occasionally import items from other countries and also sometimes make foreign exports. So, here’s how your VAT registration threshold will be calculated.
The VAT registration threshold = taxable supplies + zero-rated supplies (exports) + imports + reverse charge supplies
Calculate and add the value of all these supplies and you will know whether or not you should get VAT registration in UAE. As you may have noted, we have not included exempt supplies, since they are not considered for VAT.
There are certain conditions which will not be considered for VAT threshold calculation.
If a person acquires new business, only the taxable supplies made by that person would be considered to determine their VAT registration threshold. The supplies made the person who is selling the business need not be considered here.
It is crucial to know how to determine your VAT eligible threshold to figure out whether or not you should register for VAT or which kind of VAT registration you are eligible for. Follow our guide or read more documents about VAT in the UAE.