The value-added tax (VAT) is a consumption-based tax system which was introduced in the UAE and Saudi Arabia. The UAE VAT is applicable on certain goods and products at the standard rate of 5 per cent. VAT is paid by businesses while making a taxable supply and it is ultimately borne by the end consumer.
The UAE businesses, which cross the VAT threshold (mandatory or voluntary), need to acquire VAT registration with the FTA (Federal Tax Authority) before the deadline of April 30, 2018. Continue reading to know more about the types of VAT UAE registration, threshold, deadline, eligibility and more.
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VAT Registration in UAE – Types
There are two types of VAT registration in the UAE: Mandatory Registration and Voluntary Registration.
Mandatory Registration in UAE
All UAE based businesses (with a place of residence/business) in the UAE whose collective value of supplies over the past 12 months exceed AED 375,000 need to register for VAT. VAT registration is also mandatory for businesses who expect to reach this limit in the next 30 days.
VAT registration is mandatory, irrespective of the registration threshold, for those companies who conduct business in the UAE but do not have a place of residence or office in the state.
|Business Residence Type||Mandatory Registration Terms|
|Resident||Need to register only if the value of supplies (or turnover) exceed AED 375,000 in last 12 months or is expected to exceed this amount in next 30 days|
|Non-Resident||Mandatory to register for VAT, irrespective of threshold limit|
Businesses with a valid VAT registration can produce VAT invoices and charge VAT on taxable supplies made to their consumers.
As the name says, the voluntary VAT registration is entirely on the voluntary basis. Any resident business in the UAE that does not fulfil the threshold for mandatory registration but still wants to levy the benefits of the VAT, can apply for a voluntary VAT registration only if their annual taxable supply value is AED 187,500 (50% of the mandatory registration threshold) or more.
|VAT Voluntary Registration|
|Eligibility||Resident UAE businesses with the annual value of supplies (or taxable input expenses) over voluntary registration threshold|
|Registration Threshold||AED 187,500|
Even though this type of registration is not mandatory, it is recommended for startups and small businesses who wish to enjoy the benefits of the VAT. This also gives new businesses an opportunity to record their taxable business expenses incurred while establishing the business and during the initial business operations. Since the voluntary threshold also covers taxable expenses, new (start-up) companies can register for VAT even with zero turnovers.
VAT Registration Deadline and Eligibility
Any company conducting business in the UAE and fulfilling the threshold criteria as mentioned above is eligible to get a VAT registration.
As for the deadline, the last date for VAT registration, without penalty, has been extended to April 30, 2018.
Exemption from VAT Registration in UAE
UAE Businesses who make only zero-rated supplies or do not cross the mandatory registration threshold of AED 375,000 are not required to register for VAT or get a TRN number.