VAT (Value added TAX), a secondary tax levied on the consumption of goods and services, has been adopted by many global governments to create one more gateway for revenue generation. The UAE offers several tax-free business zones that make it attractive for foreign investors and budding businesses from across the world. VAT is government recognized and having a business registered under the VAT law carries a lot of weight. Having realized the value of VAT, the GCC countries have recently registered themselves under VAT law and made it effective from 1st Jan 2018 with 0% to 5% as the VAT rate.
The UAE government has made VAT a prerequisite for the establishment of any business in Dubai, whether small, medium, or large. However, certain conditions apply and the VAT registration in Dubai includes a few important and tedious measures.
VAT registration in Dubai
Registration of business entities for VAT depends on the income generated by the business. The following table shows entities that need a VAT registration in Dubai:
|Companies whose taxable supplies and services or imports above AED 375,000||Mandated to apply for VAT registration|
|Companies having taxable supplies and services or imports between AED 187,500 and 375,000||Can voluntarily apply for VAT registration|
|Companies having taxable supplies and imports less than AED 187,500||Not required to apply for VAT registration|
WHY VAT REGISTRATION IS OF PRIME IMPORTANCE TO ANY BUSINESS SETUP IN DUBAI, UAE:
- Worldwide authentication of the company registration.
- It boosts the business profile
- One may claim for VAT refunds
- It helps to grab a mass market
VAT REGISTRATION PROCESS IN UAE
To register in FTA (Federal Tax Authority) for VAT, a person must fill the VAT Registration form online and submit the same to the authority along with necessary supporting documents.
VAT GROUP REGISTRATION
VAT Group Registration is a tax registration process where two or more business parties club together to form a group, intending to pay a single tax. By registering under the Group VAT scheme, the businesses under consideration get a single VAT number and can file a single return. A VAT group allows people and entities that are closely linked financially, economically, and organizationally to operate as a single VAT person.
THE FOLLOWING PREREQUISITES NEED TO BE FULFILLED BY THE CONCERNED PARTIES TO FORM A VAT GROUP:
- Each party should have a “place of establishment” or a “fixed establishment” in the UAE [‘place of establishment’ implies a location where a business is legally established in the UAE or where significant management decisions are taken and central management functions are conducted; ‘fixed establishment’ implies a location where a person conducts one’s business regularly or permanently, including branches]
- The concerned parties should be related at economic, financial, or regulatory levels.
- One or more persons conducting business in the VAT group shall control the others.
VAT RECORD KEEPING
Maintaining VAT records is done for tracking up-to-date information regarding VAT filing, and to avoid unnecessary tax payment. Any company registered under VAT Law must maintain its book of records for a minimum period of 5 years. The core essentials of this book include:
- Sales and purchase invoice
- Debit and credit notes
- Import and export notes
- Accounting books
- Zero-rated supplies and purchase
- Goods issued for private use
AVYANCO VAT SERVICES IN DUBAI
Avyanco has been instrumental in handling accounting and taxation services for many business entities; start-ups and established companies. Understanding the importance and need for VAT Services for new and existing business entities, we deliver a wide range of VAT services as listed here:
- VAT registration and VAT Group registration
- VAT compliance and control
- VAT filing and payment
- VAT Impact Assessment services
- Data record and management
- Accounting & Bookkeeping
- VAT refund claiming Services
Avyanco, since its inception, has shown finesses as a business consultant and dealt with accounting and taxation services with utmost accuracy for various clients renowned worldwide. Our VAT veterans assist you to file the beneficial VAT process and lessen the cash flow during tax payments. So, once you are with Avyanco you can be sure of some pleasant surprises that might make your pockets heavy. In any accounting for VAT in UAE bear with us.
FAQs on VAT in Dubai, UAE
What is VAT in UAE?
VAT = Value Added Tax levied on the consumption or use of goods and services at each point of sale. It is in existence in more than 180 countries around the world. The end-consumer ultimately bears the cost.
How can I get VAT Certificate in UAE?
In-order to obtain VAT Certificate from the Federal Tax Authority the applicant must consider various aspects such as, whether to register as
- Voluntary Applicant
- Mandatory Registrant
- Tax Group
The link for initiating the process is “https://eservices.tax.gov.ae/en-us/”
What is VAT Certificate in UAE?
VAT Certificate is a Statutory Document issued by the Federal tax Authority confirming the registration of the applicant mentioning the Tax Registration Number (TRN) & the period for which the Tax Returns need to be filed.
What is the percentage of VAT in UAE?
In terms of Standard Rated Supplies, the Percentage of VAT is 5%. However, there are Exempt & Zero-Rated Supplies as well.
When company has to file VAT return?
Once the Tax Period & the frequency of filing i.e. whether Monthly or Quarterly is defined in the Tax Certificate then accordingly the company has to file its tax returns on the 28th of the month following the end of the tax period.
What are the documents required for VAT registration in UAE?
Comprehensive List of Documents & Information required for VAT Registration in the UAE
- Documents identifying the authorized signatory e.g. passport copy, Emirates ID
- Trade licenses copy of the company
- Other official documents authorizing the entity/individual to conduct activities within the UAE e.g. certificate of incorporation, articles of association, power of attorney etc.
- Description of business activities
- Turnover for the last 12 months in AED
- Supporting document for 12-month sales
- Expected turnover in next 30 days
- Estimated value of imports for one year from each GCC countries
- Estimated value of exports for one year to each GCC countries
- Whether you expect to deal with GCC suppliers or customers
- Supporting documents for customs registration in each Emirates if applicable.
- Details of Bank Account
What is minimum turnover require for VAT registration?
Taxable Supplies & Imports > 375,000 AED (Mandatory Registration).
Voluntary Registration when Taxable Supplies & Imports or Expenses > 187,500 AED.
What is penalty for late return filing?
1,000 for the first time. 2,000 in case of repetition within 24 months
What if company do not register in VAT even after more turnover?
Penalty of 20,000 AED in-case there is a failure to submit a registration application within the timeframe specified by the tax law
How to get VAT refund in UAE?
- FTA’s e-Services portal.
- Under VAT icon, there is VAT Refunds icon, and access the form by clicking on VAT refund.
- Once you submit the form, you will receive an email from the Federal Tax Authority to notify. Once approved, it will be processed within 5 business days.
- Verify the refund amount by checking your balance from the My Payment tab under the Transaction History section in the e-Services portal.
Can individual register for VAT in UAE?
Yes an individual can be (i.e. operating as a sole trader), or a legal person (further defined in Section 4) or another form of entity (e.g. an unincorporated body such as a charity or club, a partnership or trust).
How do I register for a VAT number?
Create an account on e-services section & register for VAT reading & understanding the VAT Registration Guide. The most suitable option is to outsource it to a Tax Professional.
Do free zone companies need to register for VAT?
Yes. Free Zone companies also should register for VAT in the UAE.
If company import the goods do, they have to pay VAT amount immediate?
VAT rate of 5% is applicable at the point of sale. VAT need not be paid immediately however there is an exception in-case of import of precious metals, on which VAT rate of 0% is applicable at the point of sale. However, an import declaration needs to be made based on 8 scenarios.
What is FTA inspection for VAT?
FTA inspection is audit conducted by the Federal tax Authority examining the liability of a taxable person.
Who can file tax return of the company in UAE?
Tax returns can be filed by both the company & a tax expert/professional, however it is advisable to hire a professional and file return to avoid any mistakes and delay.
How to cancel VAT number in UAE if company is liquidated?
Login to your Federal Tax Authority (FTA) online portal. Home page, there will be an icon/tab for ‘De-Registration’. After clicking on that VAT Deregistration form needs to be filled and send to the authorities in order to review and approve the VAT Deregistration
What are the penalties not filing VAT return in UAE?
Penalty in-case of failure of the registrant to submit a tax return within the timeframe specified by the tax law. 1,000 for the first time. 2,000 in case of repetition within 24 months.
What are the penalties for not paying VAT liabilities at the time of return filing?
Failure to pay the tax stated in the tax return/tax assessment form within the timeframe specified by the tax law.
- 2% of the unpaid tax is due immediately.
- 4% is due on the 7th day following the deadline for payment.
- 1% daily penalty will be charged on any amount that is still unpaid after 30 days from the deadline for payment, up to a maximum of 300%.
Does the VAT is Expense for the company?
VAT is not an expense for the company as it is an indirect tax & is collected at every point of sale. However, it is an expense for the end consumer as the end consumer does not get the benefit of Tax Credit