Value-added tax (VAT) was introduced in the year 2018 in the UAE. With the introduction of this federal tax, the UAE shed its long-standing tax-free status. Notably, the UAE’s Federal Tax Authority (FTA) was also launched shortly before this tax was implemented. As of 2024, VAT continues to be applicable and has been a major success for the UAE since its introduction six years ago. The tax has helped the UAE government collect billions of dirhams as revenue and has successfully met its purpose of diversifying revenue streams. All businesses falling under the scope of VAT in Dubai and the rest of UAE must diligently fulfill their obligations, and not doing so will attract penalties. One of the key obligations for any business in the UAE is VAT registration if eligible, and this blog aims to help you better understand the eligibility and procedures required to register for VAT in Dubai and other Emirates of the UAE.
Check Out: Corporate Tax Registration in the UAE
What is VAT in the UAE?
In simple terms, VAT can be defined as a form of indirect tax levied on the supply of most goods and services in the UAE. The applicable VAT rate in the UAE is 5%. As per the UAE’s VAT law, businesses with an annual turnover of over AED 375,000 on taxable imports and supplies must register for VAT, and charge the tax on taxable supplies of goods and services. While VAT is paid by the end customer, it is collected by the business entity and paid to the government.
Check Out: Accounting and Bookkeeping Services in Dubai
Who Must Register for VAT in Dubai and the Rest of the UAE?
As per the VAT laws in the UAE, a business must register for VAT once its taxable imports and supplies cross a specific threshold. There are 2 registration thresholds for businesses: voluntary registration threshold and mandatory registration threshold. Businesses must mandatorily register for VAT if their taxable imports and supplies cross the mandatory registration threshold of AED 375,000. In case the taxable imports and supplies are over AED 187,000, a business can voluntarily register. Through voluntary registration, a business can reclaim VAT on its expenditures.
Documentation for VAT Registration in Dubai and the Rest of the UAE
To complete the VAT registration process with the FTA, you are required to submit the following documents:
1. Copies of the passports of the shareholders
2. Copies of Emirates ID of the shareholders
3. Business license
4. Financial statements
5. Bank account information
6. Proof of business address
Please note that in addition to the above documents, you may be required to submit additional documents.
How to Complete VAT Registration in Dubai and Other Emirates?
The process to register for VAT in the UAE requires you to submit an application to the Federal Tax Authority along with the documents given above. It is advisable to secure the services of a VAT consultant in Dubai or other Emirates in the UAE to ensure a seamless registration process. Besides registration, it is also necessary to ensure that your business structure is suited for the implementation of VAT, and a professional VAT service provider can assist you in this regard. In addition to this, you can also be assisted with other VAT-related services including return filing, claiming refunds, and so on.
Penalties for Non-Compliance with VAT Registration Laws
A business may be penalized in the following scenarios for not complying with VAT registration-related laws.
Not Registering for VAT
A business that has not registered for VAT despite crossing the mandatory threshold of AED 375,000 is liable for a penalty of AED 10,000.
Not Remitting the Collected for VAT
A business that is yet to complete VAT registration may knowingly or unknowingly charge VAT on its supplies. In this scenario, the business must remit the VAT to the government, and not doing so within the allotted timelines can attract penalties.
Classification of Supplies for VAT
Below we have explained three of the most common categories of VAT supplies in the UAE.
Standard-rated supplies
These supplies are taxed at a standard 5% rate. Most goods and services in the UAE fall under this category. A business may be able to claim the VAT charged by the supplier for these supplies.
Zero-rated supplies
Even though these supplies are deemed as taxable, VAT will be applicable at a rate of 0%. This means that a business can reclaim the VAT incurred on their own business expenditure. Examples of zero-rated supplies include goods exported outside the GCC, supply of educational services, and so on.
Exempt supplies
These supplies do not incur VAT at the time of sale or purchase. Examples include undeveloped lands and services for public transport.
InZone offers comprehensive VAT services in Dubai assuring you of all the assistance needed to handle your VAT obligations in the UAE. From registration to implementation assistance, return filing to refund claiming, InZone can help you stay compliant and avoid penalties.
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