Value-Added Tax (VAT) is a consumption tax assessed on the value added to goods and services. In the UAE, the standard rate of VAT is 5%.
- Businesses must register for VAT if their annual VAT taxable turnover exceeds the mandatory registration threshold of AED 375,000.
- A voluntary registration for VAT will be possible if the turnover is below the mandatory registration threshold but exceeds the amount of AED 187,500.
In effect since Jan 1, 2018
- Businesses with an annual turnover exceeding AED 150 million should apply for registration by 31 October 2017
- Businesses with an annual turnover exceeding AED 10 million should apply for registration by 30 November 2017
- All other business entities with an annual turnover exceeding the mandatory registration threshold (AED 375,000) should apply for registration by 4 December 2017
VAT is not simply a finance problem – it affects the entire business across the board and proactive steps at various stages including ensuring that the POS, the accounting software are VAT compliant & the team at all touchpoints is trained to ensure smooth running & avoiding hefty fines.
Value-added tax is commonly known as VAT is a tax on the consumption or use of goods and services. Normally, in UAE, VAT is around 5% at the point of sale. It is the business of collecting and accounting for the tax on the behalf of the government.
If we talk about VAT’s history, it was introduced in UAE (Dubai) on January 1, 2018, at the rate of 5 percent. This new change in UAE gives the new source of income, which will be continued to be utilized for goods and services. On the other hand, Registering VAT also helps the government towards the reduction of dependency on oil and other revenues.
The business houses should pay the government the tax they collect from their customers. Basically, the foreign businesses may also recover the VAT. For any business, it is important to register VAT. There are two types of registering VAT in Dubai are:
● Mandatory registration VAT
● Voluntary registration VAT
It is important for the company to have the total value of its taxable supplies and services imported exceed the mandatory registration outset over the 12 months.
Also, the business forecasts that the total value of its taxable supplies and imports will exceed the mandatory registration threshold in the next 30 days.
Your Business must register for VAT if their annual VAT taxable turnover exceeds the mandatory registration threshold of AED 375,000.
In voluntary registration, the total value of its taxable supplies and imports or taxable expenses in the previous 12 months exceeds the voluntary registration threshold Also, your business anticipates that the total value of its taxable supplies and imports or taxable expenses will exceed the voluntary registration threshold in the next 30 days.
Voluntary registration for VAT will be possible if the turnover is below the mandatory registration threshold but exceeds the amount of AED 187,500.
Generally, VAT Registration Dubai is referred to as a set of ideas in which any business can register under FTA (Federal Tax Authority). For registration, the company needs its e-services account linked with its Gmail account. Any business can apply for VAT registration in the UAE. If they satisfy the above following conditions.
The best part of registering your business is that the whole process is online, so it is convenient for e-commerce and other online business firms to apply for the same.
● Documents for Identity proof for authentication with an authorized signatory: Passport, Emirates ID, etc.
● Trade license of your company
● Provide your company’s Certificate of incorporation, articles of association, power of attorney, etc.
● Description of your business
● Supporting document for 12 months sales
● Turnover of last 12 months in AED
● Document of expected turnover in the next 30 days.
● The total value of imports and exports for one year
● Supporting documents for customs registration (only if applicable)
● Your company’s bank account details
VAT registration is necessary for all merchants or businesses who are actively associated with the production or even the production of goods and services. Online VAT registration is picking up pace among all those business entrepreneurs all over the country since it's simplified and flexible in comparison to traditional methods.
There are some vital advantages of VAT registration for your business:
1. For the surety purpose, certain authenticity is associated with your company as well as other business in the market. This is more comfortable for doing business.
2. The basic VAT registration required the turnover is more than AED 375,000. So, it gives your company appear as well established and larger which helps you to appeal to more entrepreneurs and it also helps to expand your business.
3. Help to encourage investment and personal saving by registering your company VAT.
4. Registering in VAT helps you to generate and collect more ‘n’ more revenue which introduced the indirect tax. This means minimum burden onto customers who are using your goods and services.
5. Help in your business dealing, in UAE, organizations and suppliers prefer doing business with SMEs and companies that are not registered for VAT. You may easily find that if your business doesn’t produce proper VAT invoices, established companies will be unwilling or hesitant in dealing with you. For voluntary and mandatory VAT registration alike, businesses that are registered have a tax registration number (TRN) in order to deal with other businesses easily.