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VALUE ADDED TAX
Value-added tax (VAT) was implemented in the United Arab Emirates on January 1, 2018. A standard rate of 5% applies to most goods and services; certain goods and services are zero-rated, and some are exempted supplies. The fully exempted supplies and out-of-scope supplies are relieved from VAT registration. Furthermore, businesses with zero-rated supplies can opt for an exemption from VAT registration.
Here are the key VAT registration requirements in the UAE:
Registration
Mandatory registration:
Businesses must register for VAT if their taxable supplies, taxable expenses and imports exceed AED 375,000 in the past 12 months or are expected to exceed this threshold in the next 30 days
Restrictions
Voluntary registration: Businesses can opt for voluntary registration if their taxable supplies and imports are between AED 187,500 and AED 375,000
Registration Process
To register for VAT in the UAE with the Federal Tax Authority (FTA), businesses need to gather the following documents and information:
Determine eligibility for mandatory or voluntary registration
Prepare the required documents, including:
Valid license
Passport copies or Emirates IDs of shareholders and authorised signatories
Proof of authorisation for signatories, where applicable
Business premises and contact details
Bank letter verifying company’s bank account details
Additional documents like Articles of Association, if applicable
VAT registration letter from the customs department for certain companies
Taxable supplies and taxable expenses details as stipulated as per UAE VAT law
Apply electronically via the UAE Federal Tax Authority (FTA) EMARA Tax portal.
Filing and Payment VAT returns are prepared and filed monthly or quarterly based on criteria set by FTA, due on the 28th of the month following the end of the reporting period Payments must be made by the same deadline.
Filing and Payment
VAT returns are prepared and filed monthly or quarterly based on criteria set by FTA, due on the 28th of the month following the end of the reporting period
Payments must be made by the same deadline.
Penalties
Late filing: AED 1,000 fine, doubled to AED 2,000 for multiple violations within 24 months.
Late payment interest penalty for unpaid liability.
Other penalties for defaulting various provisions stipulated under the amended Executive Regulation of Federal Decree Law No 8 of 2017.
Special Considerations
The reverse charge mechanism applies to VAT-registered businesses importing goods, buying or supplying gold and diamonds for resale or further production, engaging in specific energy product transactions (e.g., crude oil, natural gas) between registered UAE businesses or purchasing goods from designated zones within the UAE
Non-resident businesses have no registration threshold and must appoint a fiscal representative when registering for VAT in the UAE.
De-registration
VAT deregistration in the UAE allows businesses to cancel their VAT registration number with the Federal Tax Authority (FTA) based on the following criteria. Here are the applicable situations for VAT deregistration in the UAE:
Conditions for Deregistration
Mandatory Deregistration:
Business stops making taxable supplies and doesn’t expect to make any in the next 12 months
Taxable turnover falls below AED 187,500 in the previous 12 months
Voluntary Deregistration:
Taxable turnover is between AED 187,500 and AED 375,000
Deregistration Process
Apply through the Emara-Tax portal within 20 business days of meeting deregistration conditions
Provide required documents, including:
Final VAT return
Proof of business cessation, wherever applicable
Financial statements as per FTA guidelines.
Clear all unpaid VAT liabilities
File the final VAT return
Wait for FTA’s final approval
Important Considerations
Penalty for late deregistration: AED 10,000
Cannot apply for deregistration within 12 months of initial VAT registration
If you plan to continue business or expect new investors, it's advisable to retain the Tax
Registration Number (TRN) and file zero returns.
Businesses should carefully evaluate their situation and consult with tax experts before
proceeding with VAT deregistration to ensure compliance with UAE tax regulations.