A Value Added Tax (VAT) is a consumption tax placed on a product whenever a value is added at each step of the supply chain, from generation to the point of sale. The VAT in the UAE was introduced on 1 January 2018. The current VAT rate is at 5%. One of the reasons why VAT is introduced in the country is to provide a new origin of income which will be continued to be utilized to provide high-quality public service. It will further help the government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
Being disclosed under the VAT law means that a business is certified by the government, as a supplier of Goods and Services and is entitled to collect VAT from customers and dispatch the same to the government. The following things can be done by VAT registered companies
- Charge VAT on the taxable supply of products & services
- You can claim Input Tax Credit on VAT paid on their purchases, which will be deducted from VAT liability on sales
- Payment of VAT to the government
- Periodic filing of VAT return
Not just the afore-mentioned workings, all the registered companies have to arrange their business reporting formation in line with the agreed requirements such as precise and refreshed books of accounts, tax paid documents such as tax invoice, credit notes, debit notes, records to all inward supplies and outward supplies etc. are required to be maintained. Therefore, understanding the fundamentals of VAT in the UAE will be one of the important steps for preparing the VAR and obtaining the registration will be the first step towards transiting your businesses to the VAT era.
Criteria for Registering VAT in the UAE
There are a few conditions for registering VAT in the UAE. They are as follows;
- If the value of taxable supplies and imports exceed AED 375,000 in the previous 12 months then a natural or legal person in business is required to register for VAT
- If your taxable turnover is less than AED 375,000 but more than AED 187,500 per annum then you can voluntarily register for VAT
- If you expect your taxable turnover to exceed AED 375,000 per annum in the next 30 days, you are obligated to register for VAT
How to Register for VAT in 2019?
Registering for VAT service in Dubai involves two simple steps. In the first step, you need to create an e-service account and in the next and final step, you must log in to your new e-service account and complete the VAT registration process.
Creating an E-service Account
Federal Tax Authority (FTA) approved e-service account is the prerequisite for online VAT registration. The account can be set up very easily. For opening an e-Service account, visit this site and follow the steps below:
- Click on Sign up and carefully fill in the details such as e-mail Id, password, security code and security question in the form on your device's screen.
- After completing and submitting the form, an automatic email will be sent to your registered email id.
- Log-in to your account with your credentials (User Name and password)
The VAT registration is done once you log in to your e-service account. The step-by-step method on how to complete the VAT registration process in the UAE is as follows:
- Once you log in to your e-Service account, you will be able to see the option 'Register for VAT'. Click on the same
- After which, you will be navigated to ‘Getting Started Guide'. This guide helps you understand a few important aspects of the VAT registration process in the UAE. It also presents the details on the data required for completing the VAT registration form. Once you read all the details, the next thing you need to do is tick 'Click here' to confirm you have read the getting started guide' and click on 'Proceed'
- After clicking ‘Proceed', a VAT registration form will open
- There are 8 sections under the VAT registration online form whose details need to be furnished for completing VAT registration. The sections are as under;
- About the Applicant
- Details of the Applicant
- Contact Details
- Banking Details
- Business Relationships
- About VAT Registration
- Review and Submit
The progress of VAT registration can be traced by the applicant by the different colours indicator. The section which is in-progress or in which you are updating the details of, will be denoted by a colour 'Brown' and the ones which are completed will be denoted by a colour 'Green' with a tick mark.
After putting in all the details, you can click on the "Submit for Approval" button to complete the VAT registration process.
Documents Required to Register for VAT
- Copy of Business Trade License
- Copy of passports of the owner or partners of the company mentioned on the license
- Emirates ID of the owners/ partners of companies (as per the business license)
- Copy of Memorandum of Association (MOA)
- Complete address of the official company location
- Company Representative Contact and a point-of-contact from the company with email, number, and other contact details.
- Company Bank Details including IBAN
- Details other commercial entities of the owners/partners (if any)
- The income statement for the last 12 months (Signed & Stamped by the owner or the manager)
- Amount of the expected revenue, turnover, and expense for the next 30 days after VAT implementation
- To specify if any kind of export or import activities carried by the company (if any)
- Provide the custom code along with the copy of Dubai Custom Code Certificate (if any)
- Indicate names of all GCC countries the company has business relations
- Define if your company would like to be registered as a tax group number for all the business structures or separate tax numbers for each
- Give in-detail information about the experience of a business for the last 5 years
Once everything is scrutinized, the application will be approved by the authorities. If you want to register for VAT, we at Business Setup Worldwide can help you with it. Contact us today- we would be glad to assist.