The value-added tax or VAT is a fee that customers are required to pay on the products and services they purchase, that goes towards supporting and funding public services in the region. At a rate of 5%, it is a business’s legal responsibility to collect the tax for the government at the customers’ point of sale. This means, that as an owner of business setup in the UAE, you have to ensure that your company is registered for the VAT.
Where to register
In order to register for the value-added tax as business setup in Dubai and the UAE, you first have to create an e-services account for your company with the federal tax authority (FTA). To do so, visit https://eservices.tax.gov.ae.
Once you’ve set up your e-service account, including a username and password, you can thereafter, register your startup business in Dubai for VAT. Your company must be registered for VAT if its taxable supplies and imports are annually in excess of AED 375,000. If your taxable supplies and imports are at AED 187,500 or under per year, then it is optional to register your company.
VAT registration procedure in UAE
The VAT registration process involves filling out an online form to identify your business and its activities. You have to specify information such as, who is operating your startup business in the UAE, and show whether it has incorporated the details of your business’s trade license, including relevant documents, and contact details, among other VAT registration requirements and VAT registration documents.
If your startup business in the UAE is not based in Dubai, but is conducting business in the UAE from abroad, it must also pay VAT, as its activities take place here. You may want to consider hiring or outsourcing your tax work to an accountant to make sure that your VAT is being calculated correctly, and that your company is in compliance with regional regulations.
As the owner of a business setup in the UAE, you are also entitled to reclaim VAT that you have paid, when purchasing goods and services for your company. For this, there is a formal claims process, for which you have to be prepared by keeping formal and accurate business records.
In the claims process, you must note how much VAT your business startup in Dubai has charged customers, and how much VAT your company has paid to the government.
If your company has charged less VAT than it has paid to the government in a year, you are entitled to apply for, and receive a tax return. In the opposite case, your company must pay the difference to the government. Any established startup business in Dubai is required by law to maintain its tax records for a period of five years.
Introduced in the UAE in 2018 at one of the lowest rates in the world, there are significant benefits to the VAT. For one, it ensures that the region receives a steady base income, which can be used to build resources for all nationals and residents within the country. This means that basic services, such as health and education are not taxed in the UAE.