The government imposes taxes on consumed goods and services, which are known as VAT. In the UAE, five per cent of the tax is levied at the point of sale. Businesses collect and account for tax from the consumer on behalf of the government and submit it within a specific time determined by law. If you are a business person dealing in goods and services, you must be familiar with VAT Registration Requirements in the UAE. 

Also, understand that you collect or pay VAT based on the transactions you make on your behalf for business. However, if you are unfamiliar with the tax policies and remain unclear about VAT, contact a Business Consultant in UAE. They can ensure that you adhere to the tax policies prevailing in the UAE, especially regarding VAT and other relevant taxes imposed on goods and services. 

What is VAT?

VAT is an indirect value-added tax on a business’s purchase and sale of goods and services. In the UAE, five per cent of VAT is imposed on goods and services consumed by businesses or consumers, slightly raising the price. However, the money collected by the central government is used in the country’s development. 

VAT is a recurring cost imposed by the government and charged at each stage of the supply chain. Ultimately, consumers usually bear the VAT cost. Businesses collect input credit or VAT Refund UAE for taxes paid on purchasing goods and services, and account for the transactions under VAT. They should act as tax collectors on behalf of the government. However, the government’s net receipts add value to the supply chain. 

The Importance of VAT Registration in the UAE

If you are a business entity dealing in goods and services, you must register your firm under UAE VAT laws and fulfil the legal and administrative formalities under VAT registration and deregistration policies. Understanding VAT Registration Requirements will ease the process of getting taxation benefits related to input credits and financial management. However, Business Consultants in UAE​ must guide you through documents and information for effective, on-time submission to obtain timely approval based on your business structure and requirements. 

Documents Required For VAT Registration In the UAE

If you are running a business in the UAE, you must submit the following documents to the Federal Tax Authority (FTA) for VAT Registration in UAE to avoid any legal penalties. You can use an online portal, making the process handy and timely. 

• A copy of the trade license
• A copy of the passport of the business owner/business partners
• A copy of the Emirates ID of the business owner/business partners
• Certificate of Incorporation 
• Memorandum of Association (MOA) or an equivalent document
• Business contact details
• Bank account details 
• Income Statement/Financial Records of the last year
• Customs Registration Number 
• Details of business activities, products, and/or services sold
• Turnover declaration for the past 12 months 
• Documents for authorized signatories

The VAT Refund UAE Process

Log in to the FAT portal to obtain input credit for the specified VAT in the UAE. Access your VAT account and navigate the tax refund section to initiate the refund process. Complete the refund form and provide details such as your bank information and tax invoices. Once you finish the refund process, the authority will verify and approve the VAT Refund UAE within 20 business days and credit your bank account. 

VAT Limitations And Compulsions 

In the UAE, VAT registration is mandatory for businesses earning over AED 375,000 annually. Businesses crossing the limit must take tax benefits and manage their finances. However, timely compliance ensures smooth operations, avoids penalties, protects the company from legal issues, and maintains clear transaction compliance and transparency. 

Businesses Registered For VAT Typically

Understand their duty towards government-based law enforcement, including the following: 

• Charge VAT on taxable goods and services that they transact. 
• They must claim any VAT refund UAE for goods and services related to their business. 
• Keep a range of business records, allowing the government to check that they have everything right.

All VAT-registered businesses must collect and report the amount they have charged for VAT to the government. The reporting is easy to do online. However, if they have been charged more than they have paid, they must pay the difference to the government or vice versa. 

VAT- Exempt Sectors

The categories of supplies exempt from VAT include: 

– Certain financial services (as detailed in VAT legislation)  

– Residential properties  

– Unimproved land  

– Local passenger transport

Zero-Rated Sectors

VAT will be charged at 0% on the following main categories of supplies. Your business Consultants in UAE​ must provide details on products and services not covered by VAT so you can manage your VAT report accordingly. Here are the articles that have zero VAT:

• Exports of goods and services outside the GCC
• International transportation and associated supplies
• Supplies of defined means of transport, such as certain sea, air, and land modes of transport (i.e., aircraft and ships)
• Certain investment-grade precious metals (e.g., gold and silver of 99% purity)
• Newly constructed residential properties, supplied for the first time in three years from the construction date; and
• Supply of defined education services, and the supply of related goods and services.
• Supply of defined health care services, and the supply of related goods and services.

Conclusion 

VAT is an indirect tax collected by businesses on behalf of the government. The UAE imposes a 5% VAT on selected goods specified by the government. As a businessperson engaged in trading goods and services, you should first consult business consultants in the UAE regarding taxation. Verify whether you are subject to VAT and its associated regulations, or if you are involved in the supply of goods and services listed under VAT. If that is the case, please ensure you obtain VAT Registration UAE. 

A competent consultancy firm will provide you with guidelines on registration and VAT Refunds UAE. Documenting each invoice and reporting to the VAT portal to secure input credit is vital to ensure you receive your entitlement of VAT paid. The initial strategy of obtaining registration and reporting on time will give you a smooth operation without imposing penalties.