If you are a business owner, you will know how challenging the process of registering as a UAE taxpayer under UAE VAT legislation is. The comprehensive procedures for VAT registration in the UAE ensure that only those applications that meet the legislative requirements are offered a UAE Tax Registration Number.
Although the procedure seems easy, VAT registration in the UAE is a time-consuming and tiresome process. The FTA adapts the tax system using empirical data and market experience, leading to updates in the VAT system. To comply with these frequent VAT updates, tax processes also change, showing all the latest incorporations and considerations in the EMARATAX system.
We have collected a few points on how to navigate through the UAE VAT tax registration process smoothly without missing any important points. So let’s go further into the process and understand the norms from a business owner’s point of view.
UAE VAT Fundamentals
To have a successful tax process, business owners need to understand the UAE VAT tax basics. Is your business into “Taxable Supplies”? If yes, then the UAE VAT system (2018) levies a 5% standard tax rate on most goods and services, but not all of them. For instance, goods sold in proposed free zones or not passing through the UAE are regarded as “out-of-scope” and are not taxable supplies. It is important to understand which products are considered taxable supplies and the various VAT rates and exemptions, if any, that can be offered to your business.
Eligibility for Tax Application
As per the law, tax registration can be accepted based on certain voluntary or mandatory circumstances. Your business needs to provide some proof of being eligible for VAT registration in UAE.
- Compulsory VAT Registration Threshold:
It is mandatory for businesses to register for VAT if their taxable supplies, from the preceding and following 30 days of their annual turnover exceed AED 375,000. This method of using a rolling calendar to calculate turnover is essential for meeting registration requirements and avoiding penalties. - Voluntary VAT Registration:
The option of VAT tax registration in the UAE on a voluntary basis is available for businesses that have reached a taxable supplies determination of AED187,500 for taxable supplies or taxable purchases in the previous 12 months. Voluntarily registering for VAT can be useful for start-ups, as it indicates their commitment to transparency and compliance with tax regulations.
Moreover, by registering for VAT, your business becomes eligible to recover VAT on expenses. In your earlier VAT filing, you can claim VAT on expenses paid for goods and services for up to 5 years on services and 12 months on goods that have not been sold, resulting in significant cost savings for your business.
VAT Registration Process
The process of VAT registration in UAE with the UAE Federal Tax Authority has been made easier using their online application system. To smoothly navigate through the process, one must understand the EMARATAX and other requirements thoroughly before applying for tax registration.
Firstly, you need to collect all the important documents, like financial statements and trade licenses. All information provided must be accurate and adhere to the FTA’s prescribed format. Keeping track of the application status through the online portal is crucial for real-time updates. You must also provide supporting evidence for your data to ensure a smooth registration process.
VAT Compliance and Record-Keeping
After successful VAT registration, your business must comply with the regulations and maintain accurate records as per the Executive Regulations and Tax Procedures Law. Implementing a proper bookkeeping and tax reporting system and keeping detailed transaction records, like invoices and receipts, is crucial.
Challenges and Solutions
Businesses often encounter challenges during the VAT registration process. For example, a lack of planning and preparation, an unclear basis for registration, incomplete documentation, and a lack of understanding of FTA requirements and processes. It is important to address these challenges proactively to ensure a smooth application process.
After a successful registration, it is crucial for businesses to adhere to best practices for ongoing compliance. This involves staying informed about tax law updates, changes in procedures, and handling amendments. A regular review of financial activities can help them identify any changes that may impact VAT obligations and taxpayer profiles.
To Conclude
VAT registration in UAE and VAT in Dubai can be a challenging task for businesses that lack knowledge about the changing procedures of the UAE VAT system. With the right information, you can easily follow the VAT registration process and stay compliant with the UAE tax laws.
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