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VAT Registration for Commercial Use of Property Under Mandatory Threshold

VAT Registration Threshold

In UAE, the mandatory threshold for VAT registration in UAE (Value Added Tax) is AED.375,000. If the annual turnover of the company exceeds the threshold, the company will become eligible to get registered for VAT. Those failing to register under VAT, even after crossing the threshold, will be fined heavily.

Commercial businesses need to know the importance of getting registered under VAT. It is not just about the taxes. If they do not register on time, their reputation can also get on stake. Keeping yourself up to date regarding UAE laws and orders is very important or else they may render the companies to face heavy fines.

VAT Treatment on Financial Services in UAE

Value Added Tax

In UAE, the Value Added Tax was introduced on 1st January 2018. It implies at a rate of 5%. For the utilization of high-quality public services, VAT must be paid. It is of prime importance as a helping source for the governments in getting better than before while reducing their dependency on other revenue sources.

In the UAE, the economic dependencies on oil and other hydrocarbons will get reduced due to the implication of VAT.

The VAT is applied on the transaction of all the goods and services at the rate of 5% on invoice prices with some exceptions included. All the commercial companies must comply with the regulations of the Taxation Authorities regarding VAT. Non-compliance to VAT can affect the business and can result in facing penalties.

There is no doubt in the fact that the cost of living will get increased due to the implication of VAT but in UAE, the percentage of VAT is very low at just 5%.  The low percentage of VAT will not have an enormous impact on the pricing schemes. So, there is nothing to worry about the increase in prices due to VAT. For those, who rarely spend on the things relived from VAT, there won’t be any major change for them.

Understanding VAT Penalties in UAE: Risks and Consequences of Non-compliance

VAT Implications on Commercial Businesses

Careful documentation will be needed from the businesses regarding each and everything. The businesses will be held responsible for proper documentation of their income, the VAT charges and more.

Businesses registered under VAT in UAE will charge VAT at the prevailing rate to all of their customers. The sum of all of this will be claimed by the taxation authority and the businesses will be held accountable for any wrongdoings in the processes.

The commercial businesses in the UAE are supposed to do the following:

  • They must charge all their customers VAT at the rate of 5% when supplying all the taxable goods and supplies.
  • They must reclaim the VAT they pay on the goods and services that are related to the business.
  • They must keep all the records so that, they may not get penalized during the audits by the taxation authorities.

Businesses registered under VAT must keep all the nitty and gritty of VAT in mind. They must record the VAT amount charged and paid on a daily basis. This will save them from a lot of issues. The reports submitted to the authorities shall be formal.

If the commercial businesses charge more VAT than they pay, they will have to pay the difference to the government. Also, if the company has paid more VAT than they have charged, they will be allowed to reclaim the difference as well.

How to Pay VAT on Commercial Properties in UAE?

VAT Registration for Commercial Use of the Property

People using the property for commercial purposes must keep records of their commercial sales and rentals. This is because exceeding the mandatory threshold will make them eligible for VAT registration in UAE.

Sometimes, when the prices of real estate fluctuate a lot, it gets difficult for new businesses to estimate the annual turnovers. In such a case, the businesses having an annual turnover of AED.187,500 will be allowed for Voluntary VAT Registration in Dubai, Abu Dhabi, Sharjah UAE.

The owners of commercial properties can collect the VAT from their tenants on the agreed rents in tenancy contracts. There might be confusion in VAT filing when the renting circle is different from VAT filing schedules. In this case, UAE vat consultants can be of great help. Registration for VAT in UAE is mandatory for businesses. For that, the businesses must follow the right procedures without any confusion.

For VAT registration, the applicants must go through the eServices section on the website of the Federal Tax Authority. There is a proper guide with which the applicants can take help and get registered.

The tax agent in Dubai, UAE can be of great help for those who want to get registered for VAT. Although the registration processes have been made quite easier for the applicants, yet there are a number of services that can help the businesses regarding tax registration.

Vat Consultants in UAE

For the professional VAT registration services, you can trust FAR. Our vat experts in UAE know how to incorporate the VAT in your business and they will make sure you comply with it properly.

VAT registration is very important. Not complying with the laws can prove to be disastrous for the companies as dealing with fines and penalties is not easy at all. So, take our vat services in Dubai UAE to get stress-free. We will surely ensure your VAT compliance in UAE.

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.