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The Impact Of VAT On Your UAE Business

VAT Consultants in UAE

The introduction of taxes, particularly VAT, can play an important role in enhancing government accountability and democracy. Official taxation records, properly managed, result in faster and more informed decision-making, and reduce the incidence of civil fraud, corruption and waste.

Once VAT-compliant systems are in place –for smaller companies these might even be low-cost software or apps– many businesses will run far more efficiently, and will gain a long-term benefit from this streamlining exercise.

Although the process of collecting and remitting VAT lies with you, the company, ultimately it will end up being charged to the customer via sales channels. So, even at the relatively low rate of 5% it shouldn’t affect your bottom-line too much.

The implementation opens up a market opportunity for advisory firms who specialize in VAT terms. Many companies won’t have the time or resources to engage in the complexities of the new VAT systems, and will look to hire consultants to help them understand the new laws, adapt their business, and set up VAT-compliant systems. It therefore offers a potentially lucrative opportunity for entrepreneurs looking to tap into this sector.

Not only will the revenue help to stabilize the economy, but it will improve the country’s infrastructure, making it easier and less expensive to do business in the UAE. Investment in infrastructure often has a significant effect on economic development because of multiplier effects, which means that for every AED 1 invested the impact on GDP is even higher. 

VAT Registration Process in UAE

Before you proceed with online VAT registration, you have to create an e-Service account with FTA. The setting up of an online account in FTA is quite similar to setting up of other online accounts like Gmail, Yahoo etc. To create an account, you need to visit ‘https://eservices.tax.gov.ae‘ and click ‘Sign up’ option available on the right-hand corner of the screen. The following are the steps involved in creating an e-Service account.

The online VAT registration form contains 8 sections as shown below, in under which the details need to be furnished for completing VAT registration

  • About the applicant
  • Details of the applicant
  • Contact details
  • Banking details
  • Business relationships
  • About the VAT registration
  • Declaration
  • Review & submit

In UAE VAT, any person conducting business is not allowed to have more than one Tax Registration Number (TRN), unless otherwise prescribed in the UAE Executive Regulation. Thus, even if you are operating via branches in more than one Emirate, only one VAT registration is required. With a similar objective, if two or more persons are related or associated parties in the businesses, they are allowed to apply for VAT group registration.

VAT Registration

VAT Registration for Businesses in Dubai

VAT Registration of business entities in Dubai for VAT depends on the income generated by the business. The slab for entities who will become responsible for VAT Registration are as follows:

VAT / TAX Registration Criteria For Businesses
Businesses having taxable supplies and imports above AED 375,000
Mandatory to apply for VAT registration
Businesses having taxable supplies and imports between AED 187,500 & 375,000
Can voluntarily apply for VAT registration
Businesses having taxable supplies and imports less than AED 187,500
Not required to apply for VAT registration

VAT-registered businesses generally:

VAT applies equally on tax-registered businesses managed on the UAE mainland and in the free zones. However, if the UAE Cabinet defines a certain free zone as a ‘designated zone’, it must be treated as outside the UAE for tax purposes. The transfer of goods between designated zones are tax-free subject to certain conditions.

  • Must charge VAT on taxable goods or services they supply
  • May reclaim any VAT they have paid on business-related goods or services
  • Keep a range of business records which will allow the government to check that they have got things right.

VAT-registered businesses must report the amount of VAT they have charged and the amount of VAT they have paid to the government on a regular basis. It will be a formal submission and reporting will be done online.

If they have charged more VAT than they have paid, they have to pay the difference to the government. If they have paid more VAT than they have charged, they can reclaim the difference.

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