Mandatory VAT Registration

The mandatory registration threshold limit is AED 375,000. Companies are required to apply following tests to know, whether companies are required to register for VAT purposes or not?

1. Registration Tests:
  • Historic Test: The total value of their taxable supplies made within the UAE exceeds the mandatory registration threshold of AED 375,000 over the previous 12 month period. This test required to be applied by the end of every month by the unregistered companies, or
  • Future Test: They anticipate making taxable supplies with a value exceeding the mandatory registration threshold of AED 375,000 in the next 30 days. This test required to be applied on daily basis. If the company is receiving an order and the management believes that taxable supplies in the next 30 days will be more than AED 375,000, then company needs to apply for VAT registration.
Registration timeline:

The Person required to register for Tax must file a Tax Registration application with the Authority within (30) days of being required to register.

Effective date of registration:

Historic test: FTA shall register the Person with effect from the first day of the month following the month in which the Person is required to register, or from such earlier date as agreed between the FTA and the Person. Future test: Authority shall register him with effect from the date on which there are reasonable grounds for believing the Person will be required to register, or from such earlier date as agreed between the Authority and the Person.

If fails to get registered:

Where a Person does not file his Tax Registration application despite being required to, the Authority shall register that Person with effect from the date on which the Person first became liable to be registered for Tax and impose the necessary penalties of AED 20,000.

2. Voluntary VAT Registration:

A business may apply to register if they do not meet the mandatory registration criteria and taxable supplies or taxable expenses of the business are more than AED 187,500 based on the following criteria:

  • Historic Test: The total value of their taxable supplies or taxable expenditure in the previous 12 months exceeds the voluntary registration threshold, or
  • Future Test: They anticipate that the total value of their taxable supplies or taxable expenditure will exceed the voluntary registration threshold in the next 30 days.
Registration timeline:

There is no timeline for the application of voluntary registration.

Effective date of registration:

First day of the following month in which application is made or any earlier date as may be requested by the Person and agreed by the FTA..

If fails to get registered:

There is no penalty if the person does not get himself registered for VAT purposes.

3. If fails to get registered:

For the purposes of understanding whether a registration obligation exists, a taxable supply refers to a supply of goods or services made by a business in the UAE that may be taxed at a rate of either 5% or 0%. Imports are also taken into consideration for this purpose, if a supply of such goods or services would be taxable if made within the UAE.