VAT Registration Questions Answers
Value Added Tax (or VAT) is an indirect tax and a type of general consumption tax. In a country which has a VAT, it is imposed on the import and supply of Goods and Services at each stage of production and distribution, including the Deemed Supply.
VAT is charged at each step of the ‘supply chain’. Ultimate consumers or end consumer generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.
A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on a tax that it has paid to its suppliers. The net result is that tax receipts to the government reflect the ‘value add’ throughout the supply chain.
To explain how VAT works we have provided a simple, illustrative example below (based on a VAT rate of 5%):
|Step-1 of supply chain||Step-2 of supply chain||Step-3 of supply chain|
|A person is supplying the Raw material to Manufacturer.||The manufacturer processes the Raw material and sold to the Distributor/Dealers/Retailer||Distributor/Dealers/Retailer sold the goods to final consumer.|
In above steps tax would be charged on each step of a supply chain in the following mechanism;
|Persons Selling the Goods||Sale Amount||5% VAT charged on the Sales||5% VAT paid on the purchases||Net VAT payable to Govt.|
|Raw Material Supplier to Manufacturer||1,000,000||50,000||–||50,000|
|Manufacturer to Retailer||3,000,000||150,000||50,000||100,000|
|Retailer to end consumer||5,000,000||250,000||150,000||100,000|
|Total VAT paid to the Govt. by end consumer||250,000|
Who is required to get register for VAT?
A business should register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of 375,000 AED over the previous 12-month period or business anticipates making taxable supplies with a value exceeding the mandatory registration threshold in the next 30 days. The Person who is required to register must file the registration application with the Authority within (30) days of being required to register.
Could a business Voluntarily choose to Register for VAT?
A business can also choose to register for VAT voluntarily, if the supplies and imports of the business are less than the mandatory registration threshold, but greater than the voluntary registration threshold of AED 187,500 over the previous 12-month period or the business anticipates making taxable supplies with a value exceeding the mandatory registration threshold in the next 30 days.
In connection of above, it is important to mention here that supply of Capital Assets belonging to the Person shall not be taken into account to determine whether a Person in Business exceeds the Mandatory Registration Threshold or Voluntary Registration Threshold.
What is the deadline for registration for VAT?
Deadline for registration is extended till April 30th, 2018. Thus, businesses registering for VAT will not face any registration penalty until April 30th, 2018, but they are required to settle all the taxes due from January 1st, 2018, as VAT law has come into effect from the said date. Earlier, the deadline for VAT registration was December 4th, 2017, which has been extended by the FTA to April 30th, 2018.
Is the English language available in the process of registration?
Yes, registration platform will also be available in English.
Will zero-rated supplies count for the registration threshold?
No, zero-rated supplies would not be counted for the registration threshold. However, concerned Person may apply for the exemption from mandatory Tax Registration upon his request if his supplies are only subject to the zero rate.
What would be the method of registration?
Application for VAT registration would be made through the online system. However, additional documentation may be requested offline by the Authority.
Is it possible to get register as a Tax Group?
Yes, it is possible to be registered for related companies for tax purposes as a single taxable person. In this regard, Businesses that satisfy certain requirements provided by the legislation (such as being under the same ownership and located within the state) will be able to register as a VAT group. For some businesses, VAT grouping will be a useful tool to simplify accounting for VAT. By registering under the Group VAT scheme, businesses will get a single VAT number and can file a single return. A VAT group allows people and entities that are closely linked financially, economically and organizationally to operate as a single VAT person. In this regard, a request to register a Tax Group shall be made by the representative member of that Tax Group.
Could Registrant apply for the VAT deregistration or not?
Yes, Registrant could apply to the Authority for Tax Deregistration, if Registrant stops making supplies and does not expect to make any such supplies over the next 12-month period or value of his Taxable Supplies during the past (12) months was less than the Mandatory or Voluntary Registration Threshold. However, in the case of voluntary registration, an entity that is registered on a voluntary basis and wants to deregister from a VAT should be registered for at least 12 consecutive months prior to their deregistration application. In this regard, the Registrant must apply to the Authority for de-registration within (20) business days of the occurrence of any of the afore-stated condition.
whether a person registered in Dubai is also required to get register in Abu Dhabi?
No, a person registered in Dubai is would not be required to get itself register again in Abu Dhabi.
Would a person making sale across the GCC (Gulf Cooperation Council) be liable to register in each member state?
A business selling across the GCC will only be required to register for VAT in another member state if the nature of its supplies of goods and services requires it to be (e.g. the place of supply is in another GCC member state and the reverse charge mechanism cannot be used).
Is only residents of the State are required to register, does this mean that non-residents are not required to get VAT registration?
There is a requirement for non-residents to register for VAT in the UAE, in the event that they need to pay VAT on supplies made by them in the state (e.g. the place of supply is in the UAE and the customer is not able to self-account for the VAT due under the reverse charge mechanism).
Read more about Value Added Tax (VAT) In the United Arab Emirates