When is VAT Registration Mandatory in the UAE?
VAT Registration Mandatory in the UAE

When Value Added Tax (VAT) Registration is Mandatory in the UAE

Being one of the most desirable business destinations for entrepreneurs, the UAE introduced VAT in January 2018. Recognised as a tax-free country globally, the rate of VAT is, however, 5 percent which does not burn a big hole in the business owners’ pocket. As VAT provides source of income to the government, it reduces the dependency on oil and other hydrocarbons as the primary source of revenue. Understanding the criticality of VAT for the government, it is necessary for businesses to take advice of VAT consultants in UAE in providing high-quality services. 

 

Since VAT is a form of indirect tax, it is applied at the each stage of supply chain from production to sale. Therefore, it necessitates businesses need to register for VAT and adhere to the UAE laws and regulations. Here is the criteria for registering for VAT.

Criteria for registering for VAT

Before VAT registration, business must certain criteria laid down by the UAE authorities. It is mandatory for businesses to undergo the VAT registration process under two cases:

 

  1. If the taxable supplies and imports of a business exceeds AED 375000 per annum, then the business needs to register for VAT.
  2. No other person is obligated to pay the due tax on supplies that are taxed by a non-UAE based business, regardless of its value. 

 

On the other hand, VAT is also an option for businesses whose supplies and imports exceed AED 187500 per annum. A business house pays the tax to government, collected from its customers. Additionally, it gets a refund from the government on the tax that has to be paid to its suppliers. 

 

To simplify the criteria for registering for VAT, businesses must consider consulting tax consultants in UAE.  

How is VAT collected

In the UAE, business registered for VAT collect the amount on behalf of the government. On the other hand, a standard 5% increase in the cost of taxable goods and services is charged from consumers when they make a purchase in the UAE. In addition, the tourists are also obliged to pay the VAT when they make a purchase in the UAE. 

 

The UAE government imposes VAT on tax-registered businesses on taxable goods and services supply, at each stage of supply chain including production, sourcing, sale, and other processes. 

Implications of VAT

The UAE has several implications of VAT on individuals as well as businesses. As a general consumption tax, the VAT is applied to the majority of transactions while a limited exemption is granted. This is why, the cost of living in the UAE is slightly higher. As a solution to this, if an individual spends majorly on the items that are relieved from VAT, they are unlikely to face an impact of the cost increase. 

 

For businesses, the UAE government requires them to carefully consider documenting their business income, associated expenses and VAT. Registered businesses charge VAT to all of their customers and incur the same when they buy from sup0pliers. The difference between the two can be reclaimed in which  the tax consultants in UAE offering corporate tax services in UAE assist businesses with diligence. 

 

Thus, in today’s globalised world effective risk mitigation by staying vigilant about AML compliance has become critical. By taking proactive steps, businesses in the UAE can traverse through these challenges, whilst upholding the highest ethical standards.               

The government of UAE requires businesses to keep a thorough check on their financial records, especially when the business is VAT registered. To adhere to all legal requirements, VAT consultants in UAE help businesses in navigating the taxation landscape. 

 

If you are are VAT registered business or looking to register your business for VAT, connect with A&A Associate. We are team of VAT consultants in UAE and help you avoid potential pitfalls that may arise due to non-compliance. 

Request for OurFree Consultation

A&A Associate

Business Setup in UAE

A&A Associate

Legal Service

Scroll to Top