How to Register for VAT in Dubai, UAE: Step-by-Step Guide

The Emirates is the most favorable destination among all Gulf countries for foreign businesses looking for a hassle-free business setup in the Middle Eastern market. Dubai is already the first choice and is attracting more and more investors with its investor-friendly policies and excellent expansion opportunities. However, VAT registration Dubai has slightly affected the emirate’s reputation as an investor-welcoming market.

FTA VAT registration law in the UAE was introduced by the national government to diversify its economy and to make sure its tax framework aligns with globally approved standards. Keep reading this blog to know everything about VAT registration in Dubai, from who needs to register for it and document requirements to VAT registration benefits and steps. 

What is VAT in the UAE?

VAT registration Dubai is mandatory for businesses with an eligible annual income under this FTA guideline. This indirect tax is applied to goods and services handled at each point in the supply flow. In simple words, eligible businesses collect VAT on their sales on behalf of the FTA, and the standard VAT rate is 5% in the Emirates. The UAE’s tax authority introduced this in 2018 to end the economic dependence on particular sectors and create diverse revenue sources. Businesses collect VAT on sales and recover VAT on expenses, ensuring they are only charged for their actual contribution.

For example, a manufacturer operating in Dubai buys raw materials worth AED 500, and adds a value of around AED 30 during the manufacturing process of the final products. The value of the final product now is AED 130, and with 5% VAT rate (AED 6.5) applied, the price for the retailer would be AED 136.5. Now, the retailer adds the value of AED 20, and the new price of the products is AED 156.5. After again applying 5% VAT rate, the retailer will sell the products to consumers for AED 164.32.

Who Needs to Register for VAT in Dubai?

Not all businesses operating in Dubai need to comply with FTA VAT registration guidelines, and it is also not applicable only for large businesses. If your annual sales or income exceed the official VAT limit, registration for VAT in UAE becomes mandatory. However, if you don’t do so, you will have to pay hefty fines and face serious legal issues. 

• Mandatory VAT Registration Dubai: Businesses operating in the Emirates with annual VAT-applicable sales and imports over AED 375,000 or are likely to cross this value in the next few weeks need to register for VAT. Moreover, VAT in Dubai for businesses, especially foreign businesses, selling taxable goods or services, is mandatory no matter the value, if no one is responsible for paying VAT taxes on their behalf. 
• Voluntary VAT Registration Dubai: VAT in Dubai for businesses with VAT-applicable supplies and expenses over AED 187,500 in the last year or expected to surpass this limit in the upcoming month is not mandatory. However, they can voluntarily register for VAT, which helps them to recover VAT paid on business expenses. 
• Exemptions: If you operate a business in certain sectors, including education, healthcare, and specific finance businesses, you don’t have to register for VAT. If your supplies are zero-rated, it means your business is excluded from VAT registration in UAE. However, it also means that you can’t get a refund of VAT paid on business costs. 

Benefits of VAT Registration for Businesses

Now you’re aware of who needs to register for VAT in UAE and who doesn’t. For businesses with a taxable turnover of AED 375,000, it is mandatory, but small businesses with a taxable turnover of AED 187,500 can voluntarily register for it to secure the following benefits: 

1. Making Your Business More Trustworthy

If you register for VAT in UAE, you can secure a more trustworthy image for your business, as it shows that your business is operating legally and meets the mandatory compliance requirements. With a professional image, you can increase your chances of securing partnerships with business partners and loyal customers.  

2. Recovering VAT Paid on Business Purchases

Another benefit of FTA VAT registration in the UAE is that you can recover VAT paid on business expenses by collecting VAT on your sales. By reclaiming VAT on expenses, like office rent and business equipment, you can reduce your overall operational costs. Moreover, it also helps you invest more in scaling your business in new regions. 

3. Competitive Edge

By adhering to the requirements for VAT in Dubai for businesses with a turnover exceeding AED 375,000, you can secure a competitive edge against your market competitors. By being compliant, you can increase your chances of securing government, semi-government, and high-value contracts. Moreover, businesses with clear financial records and compliant VAT practices can easily navigate the FTA audits without additional burdens.  

Step-by-Step VAT Registration Process

The next thing that will be discussed in this UAE VAT registration guide is to understand the VAT registration process in Dubai. Firstly, you need to determine whether you’re eligible for mandatory or voluntary VAT registration, which depends on your annual taxable turnover. Secondly, you need to gather the important documents so that you don’t have to face any issues during the registration process. Here is detailed information on how to register for VAT on the FTA portal:

Step 1: Create an FTA Account

Firstly, you need to visit the FTA Website to access VAT services in Dubai. Start by creating or activating your Emara Tax account, which provides access to the VAT registration form and other services.

Step 2: Fill Out Business Details

The next step is to fill out the accurate information about your business in the VAT registration form. You’ll be asked to enter your trade license, Emirates ID, turnover, and other details.

Step 3: Upload Required Documents

After filling out the form, upload the requested documents, including scanned copies of a valid trade license, bank details proof, and others. 

Step 4: Submit the VAT Application

The next step is to submit the application form, but before submitting this review the filled-out details. Then submit it along with the requested fees charged by the FTA for providing VAT services in Dubai.

Step 5: Wait for the VAT Certificate

Lastly, you have to wait for the approval, and generally, this process takes around 30 days. The FTA reviews the submitted application and attested documents, and then issues a unique TRN number and a VAT certificate. 

Documents Required for VAT Registration in UAE

If you think VAT registration in Dubai is very difficult to navigate, then you’re not completely right. It is because with complete knowledge of the registration procedure, you can easily navigate it. Moreover, you can secure expert support from reliable corporate tax consultants in Dubai to make this procedure simpler. Here are the main documents you need to prepare for successful VAT registration in the Emirates: 

• A valid trade license
• Passport and Emirates ID of all business owners and partners
• Contact and business address details
• Bank account information
• A brief about business operations
• Past financial records (sales invoices, turnover estimates, bank statements)
• Proof of office location, utility bill, or lease agreement
• Power of Attorney and MOA

Common Mistakes to Avoid During VAT Registration

Even after successful FTA VAT registration, your responsibilities are not ended, as you have to avoid the following common mistakes for smooth VAT registration in the future:

• You must register for VAT in UAE without any delay if you pass the eligible annual taxable turnover limit, as this will keep you safe from hefty fines and serious issues. 
• Secondly, always use the right standards and methods for VAT accounting. If you’re not aware of it, you can take assistance from trusted corporate tax consultants in Dubai that will help you make VAT accounting and compliance simpler. 
• You must make sure to collect VAT from your customers on all VAT-applicable products and services, and pay it to the FTA to maintain compliance with required standards. 
• Businesses must always avoid the delayed filing of VAT returns, as not only does it make them pay hefty fines, but also negatively affects their professional image. 

What Happens After VAT Registration?

Here are three main things you need to keep in mind after completing the step-by-step VAT registration process: 

1. VAT Filing Responsibilities

After you register for VAT in UAE, you must regularly file VAT returns through the FTA portal. You must report the VAT you’ve collected on your VAT-applicable sales and you’ve paid on business expenses. Always maintain accurate invoices, transactions, and other paperwork records, so that you don’t have to face any extra burden during VAT filing. 

2. Penalties for Non-Compliance

Another thing to keep in mind after FTA VAT registration in Dubai is to follow all the VAT rules, as the Emirates’ tax authority charges heavy penalties for non-compliance. Generally, businesses face non-compliance issues like missed VAT deadlines, inaccurate VAT calculations, and giving wrong information. So, always make sure to understand and comply with VAT duties from the day of registration. 

3. When to Update or Cancel VAT

If you expand your business, change ownership, or stop operations, you need to update your VAT details with the FTA. Additionally, if your annual taxable turnover drops below the eligible limit, you should immediately cancel the UAE VAT registration. However, if you don’t update your status or cancel registration on time, you will face severe legal issues.  

How Arabian Wingz Can Help You With VAT Registration

VAT registration Dubai and timely filing of accurate VAT returns are two important compliance requirements under the FTA corporate tax guidelines and laws in the UAE. However, this process might be difficult to navigate for foreign businesses, as operating in a completely different legal and tax environment is difficult. For more information, please contact us.

You can secure expert support for hassle-free VAT registration with Arabian Wingz, a trusted name among the top-rated corporate tax consultants in Dubai. Our team of corporate tax and financial consultants and advisors is well-versed in VAT registration requirements and procedures. We offer our clients complete assistance with our VAT services in Dubai, so they only have to focus on their core business functions. 

Make Arabian Wingz your trusted partner for smooth VAT registration in Dubai, as we keep our clients protected and compliant with the necessary compliance requirements. 

Also Read: Top 12 VAT Consultants in Dubai

Frequently Asked Questions (FAQs) about VAT Registration in Dubai