Value Added Tax in the UAE: What’s the Scenario?

The UAE attracts investors from all over the world for many reasons, one of which is its attractive tax environment. While the UAE government does not levy personal and corporate income taxes, businesses and individuals are subject to other taxes, such as VAT.

VAT is relatively new to the UAE business landscape, having been introduced only recently in 2018. Implemented at a flat rate of 5%, the purpose of this tax is to provide the government with additional revenue, which will be used to fund high-quality public services.

Who Requires VAT?

“Is VAT mandatory for my business?” This is a common question business owners in the UAE ask, especially if they are new to the market. VAT IS NOT MANDATORY FOR ALL BUSINESSES. While some products and services are VAT exempt, the tax is levied upon the consumption of goods across various business sectors.

In the UAE, VAT registration is mandatory if your supplies and imports exceed AED 375,000. Under the tax law, businesses whose taxable imports and supplies exceed AED187,500 can voluntarily pay VAT.

So, what are these “taxable imports and supplies?”

According to UAE’s Federal Tax Authority (FTA), “taxable supplies” are categorised as “ goods or services made by UAE-based businesses that may be taxed at five or zero per cent. For this purpose, imports are also considered if the supply of these goods or services would be taxable if made within the UAE.

In other words, a VAT-registered business in the UAE collects tax from its customers and pays it to the government. Furthermore, the government can reclaim the VAT when a VAT-registered company pays it to its suppliers.

Now that we’ve explained the basics of VAT in the UAE let’s get to the core topic.

VAT Registration & Amendment Processes: What to Do & How to Do It

As with many other tax registration processes in the UAE, registering your business for VAT is fairly quick and straightforward. Take a look:

Step 1

Create an account on the Federal Tax Authority website.

Step 2

Visit eservices.tx.gov.ae and select “Sign Up.”

Step 3

Provide your email address and password, and answer the security questions.

Step 4

You will receive a confirmation email explaining the further steps.

Step 5

Once your email is verified, you can complete your VAT registration by logging in to your e-service account.

Amending VAT Registrations

The VAT application may need to be amended after the firm has been registered. You can make these amendments online, but you must keep in mind that you must inform the FTA within 20 days of making any amendments.

Failing to inform the administration of amendments in your tax record will attract the following penalties:

• AED 5,000 for first-time offenders.
• AED 15,000 for repeat offenders.

Other VAT-related offences also attract penalties such as:

• AED 20,000 for delayed submission of VAT registration.
• AED 1,000 for not filing VAT returns for the first time.
• AED 2,000 for failing to file VAT returns within the next 24 months.
• AED 15,000 for not displaying prices without including tax.
• AED 10,000 for the first-time offence of not maintaining records.
• AED 50,000 for failure to maintain records subsequently.

Procedure to Make Amendments to the VAT Registration

Kindly note that some VAT-related amendments require prior approval from the FTA. For amendments that do not require approval, you can follow this procedure:

1. Visit FTA’s VAT registration portal.
2. Find your approved VAT registration application in the dashboard tab.
3. Click on the “Edit” button to update the following details:

• Changes or additions regarding your business activities.
• Your organisation’s GCC activities.
• Updates or edits in the customs registration information.
• Click on “Submit” to make the changes. The amendments will automatically reflect in your profile.

Procedure for Changes Which Require FTA Approval

1. Inform the FTA in writing about the changes made to your VAT registration.
2. You can amend the details only after the FTA approves them.
3. Once you receive FTA’s approval, click on the “ Amendments” button to change the following information:

• Business details
• Business-related bank details
• Modification of VAT application
• Business relations details
• Updating the declarations
• Actual or estimated financial transactions
• Import and export details
• Authorised signatory
• Communication preferences

4. Cross-check all the information before clicking on the “Submit & Review” button.

Some sections of the VAT application are prohibited from direct amendments. The restricted sections are:

1. 'Exception from VAT registration' cannot be changed directly in the section 'About the VAT application'.
2. ‘Notification language change’ cannot be changed in the Declaration section.
3. The ‘Communication Preference’ section is also exempted from alterations.

The VAT registration and amendments process are relatively easy. However, if you require guidance, you can always reach out to our VAT consultants at Fortius.

You can also call the Federal Tax Authority at 600 599 994 or make a direct request on their official webpage.

Be VAT Compliant With Fortius Guidance

If your business falls within the VAT criteria, you must register for VAT and ensure compliance to avoid penalties. To make your VAT registration easier, invest in Fortius Consulting Services' VAT services in the UAE.