What Is The Procedure of Vat Registration In Dubai?

In the professional world, VAT is a crucial source of income for a country’s government, charged upon goods and services levied at each point of sale. In the UAE, consumers have to pay 5% extra for the purchase of particular goods and services. It is mandatory to apply for VAT registration for business owners who are earning an annual turnover of more than 5 Lakhs on the supply of goods and services. However, if the turnover is of a particular business is less than the desired limit, the business owner can avoid paying VAT to the government authorities.

Before moving further, let’s first understand what VAT is all about.

VAT Registration in Dubai

What is VAT?

VAT or Value Added Tax is an indirect tax levied on local and imported goods at each stage of production. Most of the people confuse VAT with sales tax, however, sales tax is collected once at the time of final purchase by a consumer, while VAT is collected at several points throughout an item’s production at the time of each sale is made. In short, it is a principle where a seller charges VAT from the buyers and then pays to the government.

After learning about its meaning, let’s know more about its purpose. The main purpose of VAT is to increase the government’s revenue collection through consumer spending, and its collection is considered a good way to maintain a balance between income tax and consumption tax.

How to register for VAT in Dubai?

More than 160 countries are having a value-added taxation system based on tax payer’s consumption, and not his/her income. VAT registration is classified into three categories- mandatory VAT registration, Voluntary VAT registration, and Exemption from VAT registration. One must know the eligibility criteria while applying for VAT registration. For instance, if your business turnover exceeds the mandatory registration threshold of AED 375,000 and the voluntary registration threshold of AED 187,500, then you can apply for VAT registration in Dubai.

One can fill the registration form online and submit the concerned documents along with the application form in order to receive a VAT number. After that, the Federal Tax Authority (FTA) will evaluate the information and documents, thus deciding on its approval. 

Documents Required during VAT Registration in Dubai

  • A copy of passport and Emirates ID
  • A copy of the trade license of a company
  • An elaborated description of what business activities one is dealing with
  • A record of business turnover of the last 12 months in AED
  • Details of bank accounts

These are the mandatory documents required. However, you may require following documents:

  • A record of the estimated value of imports and exports for one year to each GCC countries
  • A record of expected turnover in the next 30 days
  • Other documents such as a certificate of incorporation, articles of association, and power of attorneys are needed for authorizing a person’s identity and his/her commercial activities running in the UAE

Now that you are aware of everything that is needed for VAT registration in Dubai, you can hire professional consultants to eliminate the complexities of the registration process.

VAT Registration Process in UAE: Things to Know

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.

Documents Required

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.

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