vat

Suppliers within tax threshold must register for VAT

Limits for registration to be decided by the Tax Authority

19:28 August 27, 2017

Dubai: All UAE residents or business entities need not register for Vat unless they fall into the threshold limit as defined by the tax authority.

In simple terms, only businesses that meet a certain minimum annual turnover requirement will have to register for VAT. That is, many small businesses will not need to register for VAT.

The registration requirement according to the Decree-Law is that, if at the end of any month one’s taxable supplies for the previous 12 months exceeded the mandatory registration threshold or he expects to exceed the mandatory registration threshold in the next 30 days.

VAT is charged at each step of the ‘supply chain’. Ultimatly, consumers 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 tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.

The Decree-Law stipulates that two or more Persons conducting business may apply for tax registration as a tax group if all of the following conditions are met: Each Person has a place of establishment or fixed establishment in the UAE; the relevant Persons are related parties; and one or more Persons are conducting business in a partnership that controls the others.

The legislation also includes provisions prohibiting any Person conducting business from having more than one tax registration number, TRN, unless otherwise decided by the Executive Regulation. If related parties do not apply for Tax Registration as a Tax Group, the Authority may assess their association based on their economic, financial and regulatory practices in business and register them as a Tax Group if the association has been proved according to the controls and conditions specified by the Executive Regulation.

The Authority has the right to make changes to the Persons registered as a Tax Group by removing or adding Persons based on the instances mentioned in the Executive Regulation or as requested by the Taxable Person.

Any Person who is not obligated to apply for Tax Registration may apply if, at the end of any given month, the total value of taxable supplies or expenses which were subject to Tax incurred during the previous ‘12’ month-period exceeded the Voluntary Registration Threshold. The same applies in the event where it is anticipated that the total value of taxable supplies to be made or expenses which were subject to Tax to be incurred will exceed the Voluntary Registration Threshold during the coming ‘30’ day period.

Tax on imports

While imports are subject to tax, it is the duty of the Importer, as defined in the Decree-Law to register for Vat, if the value of imported goods exceed the threshold.

To determine whether a Person has exceeded the mandatory registration threshold and the voluntary registration threshold, the total sum of the following is calculated: The value of Taxable Supplies made by the Person; the value of concerned goods and concerned services received by the Person; the value of the taxable supplies made by the acquired whole or part of the business, if a Person acquires a whole or part of another business; and the value of taxable supplies made by related parties.

A registrant must apply to the Authority for tax deregistration if he no longer makes taxable supplies; or if the value of the taxable supplies made over a period of 12 consecutive months is less than the voluntary registration threshold. They may also apply for tax deregistration if the value of taxable supplies during the past 12 months was less than the mandatory registration threshold.