Voluntary VAT Registration in UAE

Voluntary VAT registration allows businesses with annual sales below the mandatory threshold of AED 375,000 to still register for VAT if they choose to do so. Many businesses choose voluntary VAT registration because of several practical reasons. For example, it enables you recover VAT paid on business purchases/expenses, improve your business reputation with customers as customers treat VAT registered businesses more seriously than those not registered, and you can prevent unrecoverable VAT from becoming as expense instead of an asset. To learn how to register for VAT, please refer to our guide about VAT Registration in UAE.

Who Can Apply for Voluntary VAT Registration?

A person is allowed to register for VAT on a voluntary basis if any of the following conditions is met:

• If, in the last 1 year, the total amount of taxable supplies and imports, or business’s taxable expenses surpass AED 187,500.
• You reasonably expect that your business’s taxable expenses, or taxable sales and imports will go beyond AED 187,500 in the next 30 days.

Voluntary VAT registration starts from the first day of the month after the application is submitted. However, if the applicant requests an earlier date and the FTA approves it, the registration can begin from that agreed date.

Example: XYZ LLC is starting a sports shoe business. It has not begun selling yet but is setting up its shop and buying stock. The expenses started on 1 February, and the company plans to open on 1 April.

Before opening, XYZ LLC expects to spend about AED 200,000 on costs that include VAT. Since this amount is higher than the voluntary value added tax registration limit and company has sufficient evidence to prove that these expenses will be incurred (i.e. invoices from suppliers, contracts signed with service providers, etc.), it can apply for the voluntary VAT registration.

Key Benefits and Obligations of Voluntary VAT Registration

Recover VAT on Expenses: Businesses can get reimbursement of the VAT they paid on different purchases, supplies, and day-to-day expenses. In the absence of Voluntary registration, the VAT paid on these expenses also becomes an expense instead of a receivable.  

Access to VAT Refunds: If the VAT you pay on your purchases is higher than the VAT you collect from sales, you can apply for a refund. This can give your business a valuable financial advantage, especially if you are just starting your business or have spent heavily on major purchases and expenses.

Prepare for future growth: Businesses planning to expand can benefit from early registration, ensuring they are already compliant once they cross the mandatory threshold.

Mandatory Issuance of Tax Invoices: Once registered, you must issue tax invoices and charge VAT to your customers. Issuing tax invoices is not required if you are not registered with FTA

VAT Returns: Once you have registered with the Federal Tax Authority through Voluntary VAT Registration, you must file VAT returns based on the VAT Filing timeline and deadline given by FTA. The filing can be monthly or quarterly depending on the size of your business. This timeline can be verified from the TRN certificate issued by FTA.  

Read Next: Mandatory VAT Registration

Also Read: Step-by-Step Guide to VAT Tax in UAE