According to the Travel and Tourism Competitiveness Index 2019, the UAE ranks 33rd when it comes to overall tourism. It is well known that multiple sectors of the UAE, such as the hospitality industry, airline industry, etc. highly depends upon tourism. For that reason, the nation is taking all possible initiatives to make the tourists’ experiences better and advanced. One such initiative is installing self service Kiosks for tourists. Through this, VAT Reclaim for tourists will become hassle-free.
The FTA (Federal Tax Authority) is also playing its part so that the UAE can appear more appealing to potential tourists. The VAT recovery Self-Service Kiosks for tourists are already present at many entry ports and exit ports (air, land, and maritime) across the UAE. Now, these kiosks are made available at major shopping malls and hotels too.
This will help the nation to gain popularity as a leading destination for tourists. This electronic system devised for tourists’ tax refunds is operated by the Planet company. The company is authorized by the Federal Tax Authority. Till now, the company has implemented nine kiosks at various hotels and shopping malls.
With the help of state-of-the-art technology, self-service kiosks are able to process the complete VAT refund requests for tourists. This facility is for the tourists who are leaving the UAE in the next 24 hours. A tourist can use his boarding pass as proof. After that, the tourist only needs to follow the steps which the self-service kiosk displays. Tourist must submit the tax invoice issued on the purchases they made and mark them with the ‘Tax-Free’ sticker, which a registered retail outlet provides. Along with it, he needs to submit the passport and credit card.
One must note that there is no limit on the maximum amount that one can recover if the said amount is going to be transferred to the credit card of the applicant. However, if he makes a cash refund request, then the maximum amount of AED 7,000 per day can be transferred.
The previous year stats
The Tourists Refunds Scheme was introduced in November 2018. After that, the total digital transactions grew to 3.2 million for the period between Nov 2018 and 31st Dec 2019.
Even the growth in the number of daily average tourist refunds was observed by 2.64 times. In the first month when the scheme was launched, the average was 3,720. In December 2019, the recorded average was 9, 830. This shows the FTA’s tourist refunds scheme is highly efficient as it has even encouraged retail outlets to get linked with this system.
The Target
As per the information provided by FTA, Planet is planning to install 55 kiosks by the end of the year 2020. Out of these 55 kiosks, 25 will be placed at the major malls of the country and other 30 at the hotels.
The expected outcome
It is likely that with this strategy, the services will continuously develop and become more efficient. This will make the VAT recovery procedure easier and ensure customer happiness. Ultimately, it will add to making the UAE one of the highly advanced nations across the globe by 2021.
The collection of excise tax in the UAE started on 1stOctober 2017. The Federal Tax Authority announced that the tax should only be collected through eDirham.Excise tax collection in eDirhamis introduced to deliver the safety and transparency of the financial transactions.
eDirham is a payment tool that is one of the best examples of FinTech. The UAE has emerged as one of the most advanced business hubs in the world. Therefore, excise tax collection through edirham provides a useful payment mechanism to the businesses.
After Saudi Arabia, the UAE became the second GCC nation to introduce such technology. The revenue collected through it goes to government services for the advancement of society. It covers products such as tobacco, energy drinks, and soft drinks. It will discourage the consumption of products which degrade the health of individuals
What is eDirham?
Get to know e-Dirham Card
eDirham is a FinTech technology. It was launched by the Ministry of Finance UAE in the year 2011 for the collection of revenue and service fees with ease. The payer needs a prepaid card for making the payment to the Federal Government. Later, the MOF increased its functionality by proving excise tax collection in eDirham.
Besides excise tax collection in eDirham, it connects over five thousand government services that belong to various ministries and other local and federal authorities.
The excise tax payment in eDirham can be effortlessly made as you can access this payment tool from anywhere. Collaboration between government and eDirham is done through the National Bank of Abu Dhabi (NBAD).
Various eDirham Cards
Get to know e-Dirham Card
eDirham is a FinTech technology. It was launched by the Ministry of Finance UAE in the year 2011 for the collection of revenue and service fees with ease. The payer needs a prepaid card for making the payment to the Federal Government. Later, the MOF increased its functionality by proving excise tax collection in eDirham.
Besides excise tax collection in eDirham, it connects over five thousand government services that belong to various ministries and other local and federal authorities.
The excise tax payment in eDirham can be effortlessly made as you can access this payment tool from anywhere. Collaboration between government and eDirham is done through the National Bank of Abu Dhabi (NBAD).
Various eDirham Cards
For Excise Tax Payment in eDirham
Blue Al Haslah Card
This card can be used all across the world for cash withdrawals and purchases where merchants accept the VISA brand. It is because this card is a VISA co-branded card.
Green Al Haslah Card
This card is similar to Blue Al Haslah Card, which can be used worldwide. It comes with a cardholder’s photo and name printed in English and Arabic. It is more secured as it comes with 3DS enrolment.
Red Al Haslah Card
This card doesn’t need any registration even when this eDirham card is a private label card. After you load the card with eDirham balance, it can be used for one year from that day at any eDirham G2 merchant.
Silver Al Haslah Card
This card is almost similar to Green Al HAslah Card with one additional feature. It has 3DS enrolment, which provides an additional security layer.
Gold Al Haslah Card
This card is similar to Red Al Haslah Card and, thus, a private label card. It has a validity of three years having the holder’s name printed on it in both Arabic and English language. It even has the holder’s photograph.
Get an eDirham Card
Quick and Easy way
Getting an eDirham Card is not a tough task. You just need to visit the website: www.edirhamg2.ae and complete the process.
You need to submit photographs of the following documents of individual and institutions in JPEG format:
Personal Photograph
Passport copy
Signature
Company’s registration
Submit the required personal details
Make the payment
The card will be sent within three days of payment by Aramex.
Excise Tax Payment in eDirham
How to top-up your eDirham Card?
You can top-up your eDirham Card using eDirect service. eDirect service allows you to add AED 50000 to your eDirham card by just charging a minimal fee of AED 7. Credit cards are not accepted for topping up eDirham cards.
You need to select the payment method, your bank, card number, input your passcode, add the top-up amount, give confirmation of your email id, and it’s done with just a click on the submit button.
Excise Tax Collection in eDirham
Frequently Asked Questions
Is there any call center service for eDirham?
Yes, eDirham provides a 24/7 call center service in three different languages which are English, Arabic, and Urdu.
How to register an eDirham Card?
After getting eDirham Card, you can visit www.edirhamg2.ae where the registration option is available.
VAT (Value Added Tax) system was introduced in the United Arab Emirates on 1st January 2018. As per the rules and regulations, every company whose annual turnover is above AED 375,000 must implement VAT without choice.
For implementing VAT, a company first needs to perform VAT registration. There is a standard format for creating invoice which every company needs to follow. Also, one needs to file a return carefully.
There are two types of supplies in the UAE VAT: Exempted Supplies and Taxable Supplies.
For Taxable Supplies with Standard/Full Rate, 5% VAT is charged. Zero Rate Supplies are charged 0% Tax Rate, and Exempted Supplies are exempt from Taxes. It is important for assesses to classify supplies correctly to apply the correct rate of tax.
In this current case study, the reader will find out about the various VAT related issues experienced by the company which deals with gas distribution. They reached us in January 2019, one year after the VAT implementation in the UAE. This case study explains how N R Doshi and Partners solved those issues, saving the company from huge penalties. The whole process is performed within a time-bounded period providing the results as soon as possible.
The Challenge:
The group companies include three entities, out of which only two are registered under group registration. The third entity was not registered under VAT. Out of these two registered entities, one entity was registered under individual registration too. However, a single entity cannot be registered twice.
Vendors who were dealing with the company were providing incompliant invoices. Moreover, even the company’s invoice format was not as per the VAT rules and regulations.
Out of all the suppliers with which the company deals, some were not reported under VAT, although they didn’t appear under exempted goods and items list.
When the company filed a return, for the same entity, it claimed the tax amount twice; first, from the group registration and second from the individual registration.
The company received an advance amount before 2018 from its customers to whom the service was provided after 2018. In this sort of transactions, VAT must be implemented and to be paid on 1st January 2018.
As you can check, there are several issues which required to solved before authority detects and notifies it to the company. In case the authority would have recognized it before us, the company needs to pay penalties, which could have cost it a fortune. Fortunately, the company reached us before the authorities would have reached them. We accepted the challenge and conducted one by one process to make them compliant with the UAE VAT system.
Challenge Accepted:
First, the structure of the company was required to be understood. We initiated the registration process of the third entity under the group VAT registration. Also, the deregistration process was started for the entity which was registered under group as well as individual registration. The entity needs to be deregistered from the individual registration and continue its presence under the group registration.
We checked the invoices sent by various vendors and found the following information missing:
The exchange rate was not mentioned
No rate of tax was found
The quantity of each line item was missing.
This makes the invoices incompliant as per the article 59 of executive registration number 52 of 2017. Therefore, we suggested the company to ask the respective vendors to provide compliant invoices.
Similarly, the invoices which they were producing while delivering their service to their customers were not as per the authority’s instructions. All the invoices were required to be reissued before filing the return. These were the errors detected while going through the invoices:
No exchange rate mentioned
No TRN number of customers
Exchange rate which the backend team used was wrong
The exchange rate was not as per the one notified by the Central Bank of UAE
As they have claimed tax for one entity twice, and several other related issues appeared, we required to calculate and revise the VAT to be charged and VAT to be claimed.
We advised the client to report outward standard-rated supplies based on the establishment from which supplies made instead of customer emirates.
Adjustments were required to be made on the Import of goods as custom has considered VAT as part of CIF value.
We suggested that the client should offer VAT on the difference in income as per the working of Reconciliation of VAT return with books of account. We also put our advice forward to account Reverse charge transactions in books of account, which was not accounted for earlier.
We had noted that a particular employee was on the payroll of tax group member, but he was exclusively working for a non-tax group company. The tax group member was not charging VAT for the supply of manpower to the non-tax group member. We found that out and asked them to make necessary changes.
Similarly, the tax group member was paying some expenses on behalf of a non-tax group member and claiming the input tax credit. There was no corresponding VAT invoice being created by the tax-group member and hence VAT was not being recovered from the non-tax group member. We asked the client to rectify the mistake.
Total advance amount obtained from the customers before 2018 was found. Then total VAT on the amount was calculated. This made an increment in the total VAT output which was added to the total liability.
After this, we filed a voluntary disclosure informing the authorities about the errors and omissions made.
Conclusion:
In the end, the company was provided with a proper registration under a single group VAT registration, where there are three different entities. The correct invoices are obtained from the vendors. Also, the detected errors in the invoice format used by the company are rectified. The voluntary disclosure is submitted, which saved the company from various penalties that Federal Tax Authority could have charged if they would have discovered the incompliance.
N R Doshi’s VAT Consulting Service
VAT compliance becomes facile if you have a reliable VAT Auditor with you. N R Doshi & Partners owns a team of VAT Auditors who has provided VAT Audit Services in Dubai to numerous entities. We, as the registered tax agent with the federal tax authority, provide you all types of assistance in VAT Audit Services in UAE.
We make sure that VAT implementation is done on every aspect of your business with ease. We provide VAT training to employees, prepare VAT report, and file returns for your company.
Remain VAT compliant and save yourself from penalties
We assure the correct VAT implementation on every aspect of your business by providing a reliable VAT Audit Services in Dubai.
(VAT Refunds procedure for UAE Nationals building new residences in the UAE) – UAE Nationals building new residences in the UAE and incurring VAT on the cost of the construction can claim VAT Refunds after producing the following supporting documents:
Copy of Family Book
Copy of Emirates ID
Document to the proof building is occupied (For e.g., Water and Electricity Delivery Bill)
Construction contract and certificate of completion from the municipality
Such expenses must have been incurred in relation to a new building that is used as a residence of the applicant or their family. The refund form must be sent to FTA within 6 months from the date of completion of newly built residence.
How to apply for VAT Refunds? (VAT Refunds procedure for UAE Nationals)
N R Doshi & Partners, the UAE’s renowned auditing firm in Dubai, is driving growth through expertise for its client’s business for more than 30 years. Headquartered in Dubai, N R Doshi & Partners has seven offices in the UAE, employing over 100 professionals. Our company consistently ranks among the top firms in the UAE and continues to have a dominant presence in the audit and assurance industry, driven by results and set on the bedrock of trust. N R Doshi offers a plethora of wide gamut of services-audit and assurance, VAT consulting, accounting, advisory, company incorporations, and outsourcing services which translates into:
Federal Tax Procedures Law and Federal Decree-Law on VAT provide forVAT penalties/VAT administrative penalties in UAE. Every business in the UAE must be familiar with VAT Laws and comply with its provisions to contribute towards the nation’s growth and avoid VAT penalties.
Failure to keep the required records and other information specified in the Tax Law:
AED 10,000 for the first time
AED 50,000 in case of repetition
Failure to submit the data, records, and documents related to Tax in Arabic to the Federal Tax Authority when requested:
AED 20,000
Failure to submit a registration application within the specified timeframe:
AED 20,000
Failure of the registered business to submit a deregistration application within the specified timeframe:
AED 10,000
Failure of the registered business to inform the FTA of any circumstance that requires the amendment of the information pertaining to his tax record kept by the Authority:
AED 5,000 for the first time
AED 15,000 in case of repetition
Failure of the person appointed as a legal representative for the taxable person to inform the Authority of his appointment within the specified timeframe. This penalty will be due from the legal representative’s own funds:
AED 20,000
Failure of the person appointed as a legal representative for the taxable person to file a Tax Return within the specified timeframe. The penalty will be due from the legal representative’s own funds:
AED 1,000 for the first time
AED 2,000 in case of repetition within (24) months
Failure of the Registrant to submit the tax return within the timeframe specified in the tax law:
AED 1,000 for the first time
AED 2000 in case of repetition within (24) months
Late payment penalty (Payable Tax stated in the submitted tax return or tax assessment):
2% of unpaid tax is due immediately
4% is due on the seventh day following the deadline for payment
1% daily penalty on any amount that is still unpaid one calendar month following the deadline for payment (max 300%)
Incorrect tax return by the taxable business. Two penalties are applied:
Fixed Penalty
AED 3,000 for the first time
AED 5,000 in case of repetition
% Based Penalty
% based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:
50% if the registered business does not make a voluntary disclosure or he makes the disclosure after being notified of the tax audit, and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first
30% if the registered business makes the voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit
5% if the registered business makes a voluntary disclosure before being notified of the tax audit by the Authority.
11. The voluntary disclosure by the person/taxpayer of errors in the tax return, tax assessment, or refund applicable pursuant to Article 10 (1) and (2) of the Tax Procedures Law. Two Penalties are applied:
Fixed Penalty
AED 3,000 for the first time
AED 5,000 in case of repetition
% Based Penalty
% based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:
50% if the Person/Taxpayer make as voluntary disclosure after being notified of the tax audit and Authority starting the tax audit or after being asked for information relating to the tax audit, whichever takes place first
30% if the Person/Taxpayer makes the voluntary disclosure after being notified of the tax audit but before the start of the tax audit
5% if the Person/Taxpayer makes a voluntary disclosure before being notified of the tax audit by the Authority.
12. The failure of the Taxable Person to voluntarily disclose errors in the tax return, tax assessment or refund application pursuant to Article 10 (1) and (2) of the Tax Procedures Law before being notified that he will be subject to a tax audit. Two penalties are applied:
Fixed Penalty
AED 3,000 for the first time
AED 5,000 in case of repetition
% Based Penalty
50% of the amount unpaid to the Authority due to the error resulting in a tax benefit for the person/Taxpayer
13. The failure of the business conducting business to facilitate the work of Tax Auditor in violation of the provisions of Article (21) of the Tax Procedures Law:
AED 20,000
14. The failure of the Registrant to calculate tax on behalf of another person when the registered taxable person is obliged to do so under the Tax Law. The Registrant shall be obliged to pay a late penalty consisting of:
2% of the unpaid tax due immediately once the payment of payable tax is late
4% is due on the seventh day following the deadline for payment, on the amount of tax which is unpaid
1% daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with an upper ceiling of 300%
15. A person not accounting for any tax that may be due on the import of goods as required under the law:
50% of unpaid or undeclared tax
Violations and administrative penalties related to the implementation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT):
Failure by the Taxable Person to display price inclusive of Tax:
AED 15,000
Failure by the Taxable Person to notify the Authority of applying tax based on margin:
AED 2,500
Failure to comply with conditions and procedures related to keeping the goods in a Designated Zone or moving them to another Designated Zone:
The penalty shall be the higher of AED 50,000 or 50% of the tax if any, chargeable in respect of the goods as the result of the violation
Failure by the Taxable Person to issue the Tax Invoice or an alternative document when making any supply:
AED 5,000 for each tax invoice or alternative document:
Failure by the Taxable Person to issue a Tax Credit Note or an alternative document:
AED 5,000 for each tax credit note or alternative document
Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes:
AED 5,000 for each incorrect document
VAT Services in UAE
N R Doshi & Partners is a Registered Tax Agent with the Federal Tax Authority in UAE. We provide VAT Consulting Service, which complements our other services, including, Company Formation, Advisory Services, Accounting and Finance, and Outsourcing. It enables us to provide a total solution to our clients so that they can remain compliant and avoid VAT penalties.
Our VAT Consultants in UAE are experienced in your industry and provide a practical solution. They also handle your routine compliance issues starting from VAT Registration, VAT-compliant Bookkeeping, VAT Return Filing, VAT Implementation, Voluntary Disclosure Filing, VAT Audit, Tax Agent Services, TRN Verification, and VAT De-registration.
Our VAT Services in UAEaims to provide the expertise you need to deal with UAE VAT Laws. Contact Us now to proceed towards the right direction in your journey of VAT Compliance and avoiding VAT Penalties.
Value Added Tax (VAT) came into force in the UAE on 1stJanuary 2018. As per UAE VAT Law, the current rate of VAT in UAE is 5%, and it applies to most supplied goods and services. VAT is an indirect tax, and it is also known as a consumption tax or Goods and Services Tax (GST) in different parts of the world. Over 150 countries have implemented VAT as a means to raise revenue. As a renowned VAT Consultancy in UAE, N R Doshi and Partners provides a whole gamut of VAT related services.
Value Added Tax in UAE is charged at each stage of the supply chain. It is the end consumer who bears the burden of VAT in UAE while businesses act as an agent to collect and account for tax on behalf of the Government.
You may use our VAT Calculator for UAE to arrive at the value of VAT that you should charge to your customers.
A business can opt for voluntary vat registration if its taxable turnover is more than AED 187,500.
Mandatory VAT Registration
Mandatory VAT Registration is for those businesses whose taxable turnover is more than AED 375,000.
Businesses having a taxable turnover of less than 187,500 need not register for VAT in UAE.
2. VAT Applicability
As per UAE VAT Laws, VAT is levied on the supply of all goods and services unless they are explicitly zero-rated or exempted.
3. Exempt Supplies
VAT in UAE provides for exempt supplies. UAE Executive VAT Regulations notify about the exempt supplies on which there’s no tax levy. If one supplies such goods and services, then VAT is not charged.
As per UAE VAT Law, if one supplies exempted goods and services, then he will not be entitled to the input tax credit on the purchases he makes. Say a manufacturer buys raw material at a 5% rate of tax and produces items that are exempt from tax, then the burden of 5% input tax paid on raw materials will be on him as he will not be able to claim the input tax credit.
Certain financial services, residential buildings, and supply of bare land, etc. are exempt from VAT in UAE.
4. Zero-rated Supplies
As per UAE VAT, Zero-rated supplies refers to the taxable supply on which VAT is charged at zero rates. The input tax credit is available on the purchase of goods and services, which are supplied as zero-rated supplies. VAT Laws in UAE specify that all export of goods and services in UAE subject to conditions laid down in UAE Executive Regulations will be treated as zero-rated supplies.
5. Products subject to VAT in UAE
VAT in UAE is levied on retail products such as food, beverages and jewelry, and all non-essential consumer items. It is also levied on stationery, school uniforms, after-school activities, cars, oil and gas, electronics and smartphones, second-hand goods, imported products, insurance products such as health, motor, property, and reinsurance, water and electricity, etc.
6. Services subject to VAT in UAE
Services like plastic, cosmetic, or elective surgery, education provided by private higher educational institutions, fee-based financial services, vehicle services, and repairs, catering services, hotels and restaurants, telecoms and electronic services, etc.
7. VAT on Real Estate
Real Estate is bifurcated into two categories for VAT purposes:
Commercial property transactions, including rental and sale agreements, office space, retail, public parking, and mobile homes, will attract VAT. Further, hotels, motels, and other serviced accommodations are also subject to VAT, including residential property leased to non-residents on a short-term basis.
8. TRN Verification
Federal Tax Authority issues a unique Tax Registration / TRN Number to businesses registered for VAT. Only businesses registered for VAT and having a valid TRN should charge VAT on supplies. TRN Number Verification is required when the buyer is not sure of the VAT Registration status of the supplier because any VAT paid on purchases would be available as Input Tax Credit only if the supplier has a valid TRN Number. One can verify the TRN Number of any business by visiting the FTA portal. TRN Verification helps in knowing the genuineness of the supplier.
9. Tax Return Filing
A VAT-registered business files a Tax Return quarterly. The authority may ask certain businesses to file a return every month to ensure compliance with the VAT Laws and reduce the risk of tax evasion. Further, to reduce compliance burden and administrative load, the UAE VAT Law is provisioned to allow certain types of businesses with a longer VAT return filing period.
UAE VAT Executive Regulations have issued the VAT Return Format in which a registered business must provide the information. The return filing process is online, and all VAT-registered businesses in UAE file their Return by logging in on the FTA portal.
10. VAT Audit/ Tax Audit in UAE
VAT Audit / Tax Audit in UAE is carried out by the FTA at the business premises of the taxable person known as ‘field tax audit’ or in the offices of the FTA. The taxable person is required to provide all the information in a prescribed format known as FTA Audit File (FAF). VAT in UAE requires a registered business to maintain all the financial records of transactions and file a periodic VAT Return. A taxable person is required to self assess the amount of VAT Payable and the Input Tax Credit available.
FTA, at its discretion, selects businesses for Tax Audit. The VAT audit aims to verify the correctness of a taxable person’s tax liability. In the course of the tax audit, the FTA has a right to obtain original copies of any record, verify inventories and assets of the business, and even seize them for the audit purpose. The taxable person or his Tax Agent or Legal Representative shall provide all the necessary documentary evidence, help, and assist to the tax authority. After examining the financial records of the taxable person, the FTA is empowered to issue a notice asking him to pay the VAT along with penalties if it finds discrepancies.
Tax Assessment
As per the VAT Laws in UAE, FTA will issue tax assessment in the following cases:
Failing to complete VAT Registration within the specified time
Failing to file a Tax Return within the specified time
Failing to pay for the tax payable as per the VAT Return within the specified time
Filing an incorrect VAT return
Failure on the part of the registered business to account for tax on behalf of another person when he was required to do so as per the UAE VAT Laws
Tax evasion causing the shortfall in Tax Payable
Further, the taxable person would also be liable to pay VAT Penalties applicable under the Federal Decree-Law on VAT. It is in the interest of a taxable business that it fully complies with the provisions of VAT in UAE to avoid penalties and loss of reputation.
11. Responsibilities of a Business in UAE
Maintain proper financial records and keep its accounting information accurate and up to date.
Register for VAT if it meets minimum turnover criteria
Keep proper financial records if the turnover is less than the minimum threshold to prove why it need not register for VAT
Charge VAT on Taxable goods and services if it holds a valid TRN
Claim Input Tax Credit for VAT paid on the purchase of taxable supplies
File VAT Returns on a timely basis
Pay taxes to Government if the amount of VAT charged exceeds the amount of VAT paid.
Obey VAT Laws of the UAE
VAT Consultancy in UAE
N R Doshi and Partners is well-equipped to provide VAT consultancy in UAE and help your business handle VAT related matters, including VAT Bookkeeping, VAT Compliance, VAT Registration, VAT Return Filing, VAT Audit, and VAT Tax Agent Service. Contact us, and our VAT Consultants in UAE will be at your service.
This article talks about VAT registration in UAE, including the VAT registration process, VAT registration threshold in UAE, TRN / VAT number, Online VAT registration in Dubai, and VAT deregistration in UAE.
Value Added Tax (VAT) is one type of indirect tax levied in more than 180 countries around the world. Unlike a direct tax (income tax, corporate tax), VAT is a tax on the consumption or use of goods and services, meaning it is the end customer who bears the cost of it. A Business collects the tax from customers on behalf of the Government. It pays it to the Government and obtains a refund for the tax it pays to the suppliers. To know more about VAT in UAE, refer to 11 things to know about VAT in UAE.
VAT Registration threshold in UAE
VAT Registration Limit in UAE
On 1st January 2018, VAT was introduced in the UAE. Currently, the rate of VAT is 5 percent. As per the VAT Law in UAE, VAT Registration in UAE is a must for businesses whose taxable supplies and imports exceed AED 3,75,000 on a per annum basis. For businesses with turnover exceeding AED 187,500 can optionally register for VAT. Businesses in UAE with a turnover of less than AED 187,500 need not apply for VAT Registration. Businesses expecting taxable turnover to exceed AED 375,000 in the next 30 days shall also register for VAT. While calculating the value of taxable supplies and imports, one needs to exclude the value of exempt supplies.
Obligations of a VAT Registered Business in UAE
Obligations of a Taxable Person in UAE
A VAT-registered business must charge VAT at the applicable rate on taxable goods and services.
It can claim the input tax credit for VAT paid on business-related goods and services. VAT paid on entertainment, personal, and employee-related expenses can not be reclaimed.
It must maintain proper records for the Government to check.
It must pay VAT to the Government
It has to file the VAT return periodically
Applying for VAT Registration in UAE
FTA Portal
The Federal Tax Authority (FTA) looks after managing and collecting federal taxes and fines and applying tax-related procedures in the UAE. There is a portal https://eservices.tax.gov.ae/ maintained by Federal Tax Authority (FTA) for facilitating online VAT Registration in UAE. Accordingly, one has to create an e-service account on the FTA portal and follow the steps for completing the Registration form. The same portal also enables amending a VAT registration and VAT deregistration. While filling up the Value Added Tax Registration Form, ensure that you submit the accurate information.
How to apply for VAT Registration in UAE?
Documents Required for VAT Registration in UAE and Step-by-Step Process for VAT Registration in UAE
1. Keep the following documents ready for VAT Registration in UAE – Trade License – Passport Copy of Manager/Owner or Emirates ID of Manager Owner (If – resident in UAE) or Passport Copy of Authorised Signatory or Emirates ID of – Authorised Signatory (If resident in UAE) – Proof of authorized manager/authorized signatory (articles of association, power of attorney attested by notary)
2. Login to your e-services account
Once logged-in, click on Register for VAT and read out the VAT Getting Started Guide.
3. Fill up About the Applicant section in the VAT Registration Form
4. Fill up Details of the Applicant section in the VAT Registration Form
5. Fill up Contact Detail Section in the VAT Registration Form
6. Fill up Banking Details Section in the VAT Registration Form
7. Fill up Business Relationship Section in the VAT Registration Form
8. Fill up about the VAT Registration Section in the VAT Registration Form
9. Fill up Declaration Section in the VAT Registration Form
10. Review the information and Submit it to the FTA portal
VAT Group Registration in UAE
Tax Group Registration in UAE
Businesses sharing common economic, financial, and regulatory aspects may register as a VAT group. Such common aspects could be in the form of legal status, shareholding, or voting rights. They should have a business in the UAE and should be legal persons under common control. Such VAT registration in UAE is also known as a tax group. A representative member of the group files a consolidated VAT return covering all the activities of the group, and hence it simplifies the accounting and compliance requirements. However, all members of the group remain jointly and severally liable for VAT debts. Further, all the supplies made within the tax group do not attract VAT.
Tax Registration Number (TRN)
VAT Number
Once the Value Added Tax registration process is complete, the registrant receives a TRN. TRN issued by the FTA is a unique 15 digit number differentiating a VAT registered business from the others. The registrant is required to mention his VAT registration number in various documents such as invoice, credit note, VAT return, etc. One can have a look at this article to know about TRN Verification.
VAT Registration Amendments
Changes in VAT Registration
If subsequent circumstances necessitate amendments in VAT registration, then they must be informed to FTA in 20 days from the occurrence of such circumstances. One would be able to make changes on the FTA portal itself, but some of the changes like details of the applicant, contact details, banking details of the applicant, business relationships, among others, require approval from FTA. The thing about VAT Registration in UAE is, changes like Business activities of the applicant, GCC activities section, customer registration information section can be quickly made without seeking approval from the FTA.
VAT Deregistration
Cancelling your VAT Registration
One can deregister as a Taxable Person on the FTA portal if he is required or eligible to deregister.
Penalties for failure to register for VAT in UAE
VAT Laws in UAE
If a business which is required to go for VAT Registration in UAE, fails to register for VAT in UAE within the timeframe specified by the tax law, it will attract a penalty of AED 20,000.
VAT Registration in Dubai
FAQs
1. What is Value Added Tax (VAT)?
Value Added Tax (VAT) is a kind of indirect tax. Businesses collect VAT at each stage in the supply chain, and it is the customer who bears the tax.
2. Why should a business register for VAT?
A VAT registered business can take benefit of input VAT paid on purchases and expenses. Further, non-registration amounts to a violation of the law, and it attracts penalties.
3. What is a Taxable Person?
A Taxable Person is anyone who carries out the specific economic activity and is registered under the VAT law in UAE or required to be registered under the law.
4. What are taxable supplies?
Taxable supplies include a supply of goods and services for consideration in the course of conducting business in the UAE, and it does not include exempt supply. Taxable supplies include standard-rated supplies @ 5%, zero-rated supplies @ 0%, reverse charged services received, and imported goods.
5. My turnover of taxable supplies is less than AED 300,000, but I am expecting it to cross AED 375,000 in the current financial year. Do I have to register for VAT?
Yes, you should go for voluntary VAT Registration in UAE. A person can voluntarily register for VAT if his turnover crosses AED 187,500. Further, anyone who is expecting taxable turnover to cross AED 375,000 in the next 30 days is required by the law to register for VAT. It is important to note here that VAT registration is mandatory if the taxable turnover exceeds AED 375,000.
6. Do zero-rated supplies count towards the AED 375,000 VAT threshold?
Yes, zero-rated supplies do count towards AED 375,000 VAT threshold. You have to calculate your taxable turnover accordingly.
Your search for the best VAT Consultants ends here
N R Doshi & Partners is an FTA Registered Tax Agent. As a tax agent, we can assist our clients in applying for VAT Registration in UAE, fulfilling their tax obligations and exercising their tax rights. We, as a tax agent, can also represent our clients before the FTA if the need arises. We can assist you in fulfilling your VAT compliance requirements, and saving your time and efforts. We are a trusted VAT Registration Consultant in UAE to provide you with VAT Registration Services in Dubai. We are equipped with a highly professional VAT Consultants in UAE to provide you with the best in class VAT Consulting to see that you always remain compliant with VAT laws in UAE.
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