VAT or value-added tax is a type of consumption tax that is added on a product at each stage of a supply chain where value is added. It is based on the increase in the value of a product or service from production to the point of sale. The VAT is assessed and collected at each stage; a customer or user pays VAT on the final cost of the product and is collected by the end retailer.
Who needs to register for VAT?
VAT registration is required for a business entity whose annual turnover exceeds the VAT registration threshold value in their respected countries decided by the federal tax authorities. In UAE, it is mandatory for the companies or individuals who operate a business in the country and have an annual turnover of more than AED 375,000. VAT registration is a mandatory process to avoid any fines that’s why a new business needs to keep an eye on their turnover to know if they’re approaching the VAT threshold.
If your annual turnover is below the VAT registration threshold, you can still voluntarily choose to register your business. This will help you grow your business with a positive impression and intent. Although, once you have registered for VAT, you will have to charge VAT (output tax) on your services or goods that your business offer, it will also allow you to reclaim VAT (input tax) on purchases you make that you are charged by other businesses.
VAT Registration Process
VAT is the most common taxation system adopted by more than 160 countries around the world. Almost in all countries, any business can register for VAT through an online process. Any business representative can register for value-added tax (VAT) on the Federal Tax Authority’s online portal in their respected countries where the business is operative. In UAE, VAT registration is free of charge and can be done 24/7 through the FTA website. Here’re the three simple steps to follow while registering for VAT:
- Go to the FTA website’s e-Service portal and create an account by clicking on the ‘Registration’ button.
- Verify your account via the email sent to you on registered email-id and then login to your account.
- Now fill the VAT registration form with all the mandatory credentials and submit for approval.
Make sure to provide accurate information and data that you can submit for verification. Scanned copies of all the required documents must be attached with the application form to complete the registration process.
You have to upload the soft copies of the required documents along with the application. You will need the following documents before registering for the VAT:
- Business or Trade License
- Passport/Emirates ID (for UAE residents) of the owner of the business and the authorized signatory
- Proof of authorization (certificate of incorporation, articles of association, power of attorney)
- Details of bank account and other documents to describe business activities
Consult with a business consultancy or any tax expert before applying for the VAT registration. He will explain every detail of the VAT registration process and documents required as per the country’s taxation system wherever your business is operative. VAT registration is very important for any business to grow it and if your annual turnover is more than the VAT threshold, it is mandatory to avoid any fine under tax regulations.