VAT Registration Process

Last Updated on 29 June 2017 – Rules has been announced regarding ‘group registrations’ by the Ministry of Finance.These ‘group registrations’ will allow to companies those are in the same group to register as a ‘enterprise’ for VAT purposes under one VAT registration number, and thus have only a joint return having to be filed each quarter.

Compulsory registration for turnover over AED 375,000. Voluntary registration for turnover over AED 187,000

Registration opens from Oct 1 2017 and deadline is Dec 31st 2017. Voluntary/early registration allowed from July 1st 2017.

Value Added Tax (VAT) Registration is a tax registration that is essential for the businesses and individuals who are trading or manufacturing goods in UAE. Businesses and individuals in UAE must cross check the VAT applicable rates for the goods they are selling in their state and across the state and also comply with the relevant regulation or law. However, manufacturers or traders always aware or alert with state VAT regulation and register themselves under the VAT registration, if in case turnover or income exceeds the limit which is specified by the government.

Businesses or individuals are required to register under the VAT if exceeding the mandatory VAT registration threshold. It is essential for the business or individuals to submit or file VAT returns time to time (either monthly or quarterly) to the tax authorities.

It is essential for the businesses to maintain records of all business transactions which will include:

  • Import or Export
  • Tax Invoices
  • VAT Exempted or zero-rated supplies and purchase of goods
  • Debit or credit notes
  • Records of goods/ service used personally and provided for free

All the six of GCC members in UAE have their own legislation rules and regulations and in the detail, compliance requirements will be mentioned in each respective legislation. VAT is collected and governed by the state or national government.

VAT is self- assessment means every business or individual which is registered under VAT must maintain record, measure, evaluate and report its VAT obligations and entitlements to the tax authorities.

Registration for VAT

Businesses and individuals whose turnover or income exceeds the limit which specified by the national or state government must require registering for VAT. Voluntary registration for VAT is available for those, whose business turnover is below the mandatory VAT registration threshold.

Businesses and individuals who didn’t register for VAT, are not liable to pay any VAT charges on the sales of goods and cannot claim for VAT incurred on the inputs- careful consideration must be presented to the potential amount of VAT reclaimed on purchasing by the businesses as well as the compliance costs in administering and reporting the tax, before taking such a decision.

Invoices

A VAT Invoice is a type of document that must be generated and issued by only VAT registered business. The invoice can be treated as a documentary evidence on the sale of goods and services in compliance with the law.

VAT invoices also needed by the business as a proof of evidence to support VAT credit claims, i.e. VAT incurred on the acquisition of goods and services for the purposes of the business can only be claimed if the business holds a valid VAT Invoice from the vendor. Through invoice, the end consumer is able to know that how much VAT paid by him at the time of consumption of goods and services.

Calculation and reporting VAT

After the registration under VAT, registered businesses must have to pay collected VAT to the tax authorities either monthly or on a quarterly basis. Value added tax can be calculated by the formulae output tax – Input tax.

Output Tax is the percentage of selling price received by the seller on the selling price of his final product.

Input Tax is the percentage of cost price incurred by a buyer to purchase raw materials to produce final product/ good

VAT = Input Tax – Output Tax

In most jurisdictions, the process of filing and submitting VAT return is completely done through online. VAT registered businesses are required to submit or file VAT return usually by the end of the calendar month, following the end of the reporting period, either monthly or quarterly.

What is the meaning of VAT number?

At the time of registration for VAT, the businesses or individual will be assigned a unique 11 digit number which will serve as CST Number/ VAT Number/ TIN Number for the business.