Mandatory VAT Registration in UAE

What is Mandatory VAT Registration

Mandatory VAT registration requires a business to register for VAT if any of the following conditions are met:

• Past 12 months rule: The total value of taxable sales and imports in the last 12 months is more than AED 375,000. In this case, the business must file VAT registration application within 30 days of crossing the threshold; or
• Next 30 days rule: If the taxable person expects that the taxable sales or imports will go over AED 375,000 within the next 30 days, the registration must be applied within 30 days after you have crossed the mandatory threshold.

This means businesses need to regularly check the value of their sales and imports to know if they are required to register for UAE VAT or no. The types of supplies and imports which should be considered when checking if you need to register for VAT are:

• Goods or services sold in the UAE as part of your core business activities.
• Goods or services imported to the UAE that would be taxed if they were sold locally.

When calculating the total value for VAT registration, supplies that are exempt from VAT should not be included. The value of any one-time sale of a capital asset should also be excluded.

Example 1

If a company’s taxable supplies go over the Mandatory Registration Threshold on 1^st June, it must apply for registration by 30^th June. Their VAT registration will then start from 1 July.

Example 2

As of 15^th January, ABC LLC, a company based in the UAE, had made AED 275,000 worth of taxable supplies and AED 135,000 worth of exempt supplies during the previous 12 months. Because the value of its taxable supplies was below AED 375,000, the company was not required to register for VAT at that point.

On 20^th January, ABC LLC made an additional AED 200,000 sales. This means the total taxable supplies for the past 12 months are now above the mandatory registration threshold of AED 375,000. It is therefore required to register for Value Added Tax.

Example 3

On 1^st March, XYZ LLC, a company in the UAE, was not required to register for VAT because the total value of its supplies and imports over the past 12 months was below the mandatory registration threshold of AED 375k. On 5^th March, the company received a new customer purchase order to supply AED 500,000 worth of goods by 15^th March. Since the company has already received this purchase order, its taxable revenue will exceed the mandatory registration threshold in the next 30 days. Hence, the company should apply for VAT registration.

Late VAT Registration Penalty

In the event a business does not apply for VAT registration before the deadline, FTA will impose a late registration fine of AED 10,000.

Also Read: Voluntary VAT Registration