Threshold For VAT Registration in UAE: When Must I Register?

Meeting the threshold for VAT registration in UAE means you must register for VAT; otherwise, you will have a penalty. This blog explains the vital information each business owner should know about the threshold for VAT registration, illustrating how you can register without meeting the threshold!

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Why should each business owner seek VAT registration?

Seeking to meet the threshold for VAT registration in UAE must be a priority for each business.

Registering for Value Added Tax in the UAE can offer several benefits for businesses, including:

• Enhancing a business’s credibility as it demonstrates that the company is operating by tax regulations.
• Providing a competitive advantage, as many customers and partners may prefer to engage with registered businesses for transparency and compliance.
• Facilitating smoother transactions as it aligns with global taxation norms, making it easier to engage with international partners.
• Opening up business opportunities to bid on and secure government projects.
• Prompting businesses to adopt more robust accounting and financial management practices, improving efficiency and transparency.

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VAT registration eligibility in UAE

Businesses in UAE must register VAT if the total taxable supplies they make exceed the threshold for VAT registration in UAE over the past 12 months or if they think the value of taxable supplies will exceed the VAT threshold in UAE within the next 30 days. 

If your total taxable supplies exceed AED187500, your business will be eligible for voluntary VAT registration. 

However, If your total taxable supplies exceed the threshold for VAT registration in UAE, your business will be subjected to mandatory VAT registration.

Here are two ways you can know if the business will exceed the UAE VAT registration threshold:

1- Historic (looking back) 

Review your taxable supplies in UAE for the past 12 months to determine whether the total taxable sales have exceeded the threshold for VAT registration in UAE. If it has, registering for VAT as soon as possible is necessary.

Businesses in the UAE must register as soon as they are eligible for mandatory registration to avoid a fine of no less than Dh20,000 the Federal Tax Authority impose for failing to apply. 

2- Future (looking forward)

Let’s assume your business hasn’t registered for VAT yet. If you predict that your business’s total taxable supplies will exceed the mandatory threshold for VAT registration in UAE for the next days or months, then you can register to apply VAT to your prices.

Note that:

• In practice, the future method is rarely used since businesses in the region have a larger total amount for taxable supplies over the past 12 months compared to the next thirty days.
• Basically, the historic method is the most common one to identify eligibility for VAT registration.

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Minimum threshold for VAT registration in UAE

The threshold for VAT registration in UAE is the minimum annual taxable turnover that mandates a business to register for VAT with the Federal Tax Authority (FTA) in the UAE. 

Once a business exceeds this threshold, it must comply with VAT regulations, including filing tax returns and collecting VAT on eligible sales.

The threshold for VAT registration in UAE is AED 375,000. But as we mentioned before, businesses in the UAE can also register, although they do not meet mandatory registration requirements.

Factors to consider while supplying your bank data for VAT registration in the UAE

When a company signs up for VAT on its own, it shares details about one of its bank accounts in the UAE. This includes info like:

• The bank’s name.
• Branch’s name.
• Account title.
• And so on.

Now, if two or more companies want to register for VAT together, they can use the bank details from just one of those companies. It’s best if it’s a joint account.

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Deadline for VAT Registration in Dubai

The UAE government now lets businesses in Dubai register for VAT. Companies from different areas are welcome to apply. 

You can register for VAT anytime, but the Federal Tax Authority (FTA) needs to approve category-specific applications. 

Before you start, make sure you’ve got all the needed qualifications, especially meeting threshold for VAT registration in UAE.

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Supplies not subject to VAT IN UAE

Two types of supplies don’t have VAT: zero-rated and exempt transactions.

1- Zero-rated:

It means you still pay VAT, but it’s 0%. For instance, if you export stuff outside the GCC, do international shipping, sell new homes within three years of building, or provide certain education and healthcare services, VAT is 0%.

2- Exempt transactions include:

• Certain financial services.
• Selling houses and land.
• Local passenger transport.

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Inquire about threshold for VAT registration in UAE online

Are you looking to find out if you’ve met the threshold for VAT registration in UAE, or do you have inquiries regarding your finances? Get in touch with us now and ask anything you need. Our tax experts at your services for:

• Advice and guidance to VAT-related matters.
• VAT registration.
• VAT accounting.
• Returns Filing.
• Assisting with tax compliance.
• Assisting with tax-related planning and consultations.
• Register a tax group.
• Cancel a tax group.
• Amending tax registration.
• Cancellation of tax registration.
• Modifying tax period dates.
• Determine the tax period.
• Submitting a tax return.
• Conducting tax settlements.
• Claim a refund of input tax.  

Why choose Alsun Tax Agency for VAT registration in the UAE?

We have been helping businesses worldwide with accounting and taxes since the beginning, making accounting and finance easier for your company. 

Our experts specialise in VAT and can guide you through the UAE registration process, setting it up cost-effectively.

FAQs about VAT registration threshold UAE

Do zero-rated supplies play a role in reaching the VAT threshold UAE?

Yes, they do! Zero-rated supplies count when figuring out the UAE VAT threshold. 

Even though there’s no VAT on them or exempt transactions, what makes zero-rated different is that the money from those sales adds up when deciding if you need to register for VAT.

Do I pay the government the full 5% VAT?

No, you don’t! VAT is a tax on added value along the supply chain, mainly on consumers.

When you buy something from suppliers, they’ll likely charge you VAT. But you can get this VAT from what you charge your customers. So, you only have to pay the remaining amount to the government.

Can my business retrieve all the VAT it has paid?

The VAT you can get back depends on whether your stuff is regular or zero-rated. 

If you sell things at the regular VAT rate, you can get back the VAT you paid for them. 

But it gets tricky when you sell a mix of regular and zero-rated stuff. In that case, you can only get back some of the VAT you paid. 

Do I need to register for VAT if my turnover is less than the mandatory threshold?

Once your sales hit AED 187,500, it’s worth signing up for VAT. This lets you get back the VAT you paid on stuff you bought. But you also have to charge VAT on the things you sell.

Whether the VAT is good for your business money-wise depends on your situation. 

• If your customers are other businesses with VAT, they can get back the VAT you charge them. 
• But if they’re small businesses or regular buyers, the VAT you slap on is just an extra cost for them.

Do I have the option to cancel VAT registration?

If your sales don’t hit the required limit for mandatory registration or drop below it, you can cancel your VAT registration. 

This means you don’t have to charge VAT on what you sell but can’t get back the VAT you paid on your purchases.