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Our VAT Services in UAE cover VAT Registration, VAT De-Registration, VAT Return, Filing, VAT Reconsideration and VAT Training.
VAT
Registration
UAE adopted VAT on 1st January 2018. A 5% VAT is levied on most goods & services, while a few goods and services are exempt from VAT. Business owners need to register for VAT if its taxable supplies and imports exceed AED 375,000 per annum. The business setup in Free Zones are Exempt from VAT.
According to the regulatory authority, companies in UAE need to align their businesses to ensure correct and updated ledgers to avoid penalties.
Which Businesses Require VAT Registration Services in Dubai?
Registration of business entities for VAT depends on the income generated by the business. The following are three different scenarios:
- Mandatory: Businesses having taxable supplies and imports above AED 375,000 should register the business under VAT.
- Optional: Business having taxable supplies and imports between AED 187,500 and 375,000, VAT registration is optional. This category comes under voluntary registration.
- Exempt: Businesses having taxable supplies and imports less than AED 187,500 do not need to register the business under VAT.
Registration of business entities for VAT
Registration of business entities for VAT depends on the income generated by the business. The slab for entities who will become responsible for VAT Registration is as follows:
1. Businesses having taxable supplies and imports above AED 375,000
—— Mandated to apply for VAT registration
2. Business having taxable supplies and imports between AED 187,500 and 375,000
——- Can voluntarily apply for VAT registration
3. Business having taxable supplies and imports less than AED 187,500
——- Not required to apply for VAT registration
VAT Registration for different type of Company
Newly founded company
For the newly formed business, VAT registration is not necessary, unless the new company’s turnover is AED 187,500 or more. Any new company with a turnover below 187,500 AED does not have to register VAT.
Tax Group
To register VAT as a tax group, all the member companies must be established in the UAE. Registration also depends on the number of companies that are conducting business with multiple trade licenses. FTA will issue one Tax Registration Number (TRN) to the tax group, instead of issuing one TRN for each individual member company.
International Companies
For any foreign business owners selling goods, which are located in the UAE, to UAE customers, VAT Registration is mandatory disregarding the level of turnover from such sales.
Amazon sellers and other online business
According to the Federal Tax Authority (FTA) regulations, companies that conduct business on any digital or e-commerce platforms, e.g. Amazon or Shopify sellers, must register for VAT prior to any market activities in UAE. As a general rule, the standard VAT rate (5%）will be applied to these businesses.
How will business owners calculate their VAT?
In order to assess how much the tax payable would possibly be, the business owner should first understand how much are their sales and purchases expenses in a given fiscal period. The tax payable by a particular taxpayer is equal to tax collected on output (sales) – tax paid on input (purchases).
Let’s look at an example of how to calculate output and input VAT.
Investor A owns a bakery and spends 10,000 AED acquiring raw materials. The input tax rate is 5%, as a result, the input tax is 5% of 10,000 AED, which is 500 AED.
With the purchased materials, investor A reached a sales of 20,000 AED. Given the 5% is the output tax rate, our overall output tax is 1,000 AED.
Hence, the final (net) VAT payable by investor A is 1,000 AED – 500 AED = 500 AED.
In the VAT settlement, investors deduct input VAT from output VAT then report the resulting amount to the tax office. In the case where the procurement expenses exceed the business revenue generated from sales in any fiscal period, the difference will be negative and the amount will be refunded to the business owners.
Documents Required for VAT Registration
The following documents are required for VAT Registration:
- Copy of Trade License
- Passport copy and/or the Emirates ID of the owner/manager who owns the trade license
- Contact Details of the company
- Memorandum of Association (MOA) of the business establishment
- Company Bank Details of the company
- Turnover declaration for the last 12 months
- Projected income statement for next 30-days after getting the Tax Registration Number (TRN);
- If the business deals with the customs department, then a customs letter is required.
What sectors are zero rated?
There are a few business sectors exempted from VAT, in which case the standard VAT rate is not applicable. Below are some examples of the zero-rated sectors:
- Transportation of goods and services outside the GCC or intra-GCC
- Supply of precious metals for investment
- Newly constructed residential properties within three years of their construction
- Supply of certain educational healthcare related goods and services
- The crude oil and related derivatives sectors (may vary in different member states)
Steps of Deregister VAT
Step 1 – Sign in to your FTA VAT portal.
Step 2 – On the dashboard, against the VAT registration, click on the ‘De-Register’ button.
Digital World (2012-2015)
Step 3 – Taxable Person Details are pre-populated in the de-registration application.
Step 4 – Reasons for VAT de-registration. Select from the drop-down list that on what basis you are de-registering for VAT.
- Business no longer making taxable supplies
- Business making taxable supplies, but below the Voluntary Threshold
- Business making taxable supplies, above the Voluntary Threshold, but below the Mandatory Threshold
- Other – please specify the reason
Step 5 – Effective date from which the Taxable Person is required or eligible to de-register depends based on the de-registration
Step 6 – Upload all the relevant supporting documents by clicking on ‘Choose Files’.
Step 7 – Review and confirm the authorized signatory and declaration section of the application form before submission.
VAT Deregisteration
It is common for businesses to de-register for VAT with the UAE Federal Tax Authority, also known as cancelation or termination of VAT registration. Only the FTA can approve a VAT deregistration in the UAE if the reasons for termination are valid and the necessary conditions are met. Upon registering with the FTA for the first time, businesses that do not exceed AED 187,00 in their first 12 months of operation or cease making taxable supplies can deregister from the VAT case.
Procedure of VAT Deregistration
If your business has stopped functioning you need to obtain a company liquidation letter from the government authorities to be able to request the deregistration of VAT. VAT Deregistration is done electronically through the FTA portal. Once your VAT-deregistration application is received and reviewed by FTA the status of your VAT De-Registration will start displaying ‘Pre-Approved’ after confirmation provided you have complied with the law. Then the next step is to submit the final VAT Return Filing. Businesses must clear all the outstanding liabilities in order to complete the VAT Deregistration process after the last VAT Return filing is done.
Reconsideration is the way to approach authority if you are not satisfied with the penalty decision issued by the authority. It is a request application that can be submitted by a Registrant/Non-registrant or tax agent after preparing a proper case study that produces evidence justifying the reason.
Procedure
A business or individual that receives a tax penalty from FTA can apply for a VAT reconsideration in UAE within 20 business days of receiving the penalty. Providing proof of the reasons for VAT reconsideration would allow the authority to review the decision and waive the penalties for late VAT payments.
Reminder
It may take up to 40 business days to respond to a valid and complete Clarification request. FTA will ask for additional information if incomplete requests are submitted, and it can take up to 40 business days for the FTA to respond.
Procedure
After registering under VAT/Excise, businesses are required to file periodic statutory declarations. VAT/Excise returns summarizing all the taxable transactions that the business has made in that specific period, have to be filed as per the tax periods stipulated by the FTA for each entity registered with the FTA. All the required information has to be recorded accurately on an ongoing basis. Further it is mandated for businesses to declare the VAT that has been charged on sales (output VAT). The VAT that has been paid (input VAT) by the company can be recovered, subject to the input tax recovery conditions provided in the relevant regulations.
Reminder
It is imperative that VAT/Excise returns are accurately compiled based on the underlying accounting records and must accurately reflect the amount that is due to/from the government. Any errors in filing statutory returns not only attracts fines and penalties but may also lead to loss of reputation.
At the end of each tax period, VAT registered businesses or the ‘taxable persons’ must submit a ‘VAT return’ to Federal Tax Authority (FTA).
A VAT return summarizes the value of the supplies and purchases a taxable person has made during the tax period and shows the taxable person’s VAT liability.
VAT Refund
Tax authorities apply strict criteria before they authorise a repayment. Barriers to recovering VAT refunds include a lack of understanding of the detailed indirect tax rules, difficult administrative procedures and insufficient or incorrect documentation as well as missed deadlines for a reply to the Federal Tax Authority. Unclaimed tax credits and missed or delayed refunds commonly cause negative cash flow and tax leakage that increase business costs and reduce profitability.
VAT Training
Once you are done with the VAT training with us, you’ll gain an in-depth knowledge of UAE VAT laws and regulations, and you can begin applying what you’ve learned to your business right off the bat, from implementing VAT strategies to ensuring your company has a perfect VAT management system set-up
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