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VAT Registration Threshold Calculation in UAE

Value-added tax (VAT) is a tax implemented on the goods and services levied at their sale. This is the form of an indirect tax that is applied in several countries in the whole world. The end consumer endures the cost. The companies collect the VAT from the consumer and pay it to the government on behalf of their clients. That’s the reason why it is referred to as the indirect tax.

What is the VAT Registration Threshold in UAE?

The compulsory VAT threshold for UAE resident businesses is 375,000 United Arab Emirates dirham (AED) or more, whereas businesses earning at least AED 187,500 can opt voluntarily for VAT. On the other hand, no VAT registration threshold is applied for non-resident businesses that are making supplies on which the UAE VAT is required to be charged.

Several things should be considered to determine whether the value of supplies exceeded the VAT threshold or not.

Value of Taxable Goods and Supplies

All the goods and services supplies carried out in UAE on which VAT is imposed at the rate of 5 percent including that of the zero-rated supplies are included in it. Note that all the goods and supplies exempted from VAT are not included in it.

If the company’s annual turnover exceeds AED 375,000/, it’s mandated under UAE VAT Law to register. A business with an annual turnover of anywhere between AED 187,500/ and 375,000/, may perform a voluntary VAT registration in the UAE. The business will be issued a VAT registration certificate by the FTA.

Value of Reverse Charge Supplies

Supplies on which the buyers are supposed to pay tax to the government. Such suppliers and their value are considered while calculating the annual turnover of the company for determining the threshold for VAT registration or VAT registration threshold UAE.

Goods and supplies that are imported where the importer has to pay tax.

How to Calculate Annual Turnover for VAT Registration in UAE?

If a store let’s say a supermarket is present in UAE which supplies all sorts of goods and products. It is also engaged in importing different products from other foreign countries for supplying its customers present in UAE and also exports stuff as well.

Supply typesTurnover in AED
Taxable Supplies sold in UAE    375,000 (VAT applies)
Exports     125,000
Exempt Supplies    50,000
Imports    100,000
Reverse Charge Supplies    25,000

To get an idea of whether or not the supermarket becomes eligible to pay VAT in UAE or get registered for VAT in UAE, all the above-mentioned categories are to be considered. Some supplies are exempted from VAT which will not be taken into account while calculating the threshold for getting VAT registered.

Calculate the VAT Registration Threshold in the UAE

Supply typesTurnover in AED
Taxable Supplies sold in UAE    375,000 (VAT applies)
Exports     125,000
Imports  100,000
Reverse Charge Supplies    25,000
VAT Registration Turnover    625,000

Now as the business VAT registration turnover seems to have exceeded the threshold that is mandatory for getting registered for VAT, the supermarket should register for VAT mandatorily without any ifs and buts as it is beyond the UAE VAT mandatory registration threshold.

All the companies that are based in UAE should be very clear about VAT by now and also with VAT mandatory registration. This is because it's high time we all should understand. what VAT is all about and how businesses should be operated? As VAT registration has been made mandatory for businesses exceeding an annual turnover of AED 375000, it becomes the duty of the companies to pay attention to their annual turnover.

A little carelessness may make the companies pay heavy fines and penalties. To avoid them all, the companies are supposed to get registered for VAT.

What is VAT Registration in UAE Exception?

Exceptions always exist in most matters. The same is the case with the VAT registration in UAE procedure which includes VAT registration documents submission. If a person takes the already existing business. Then, only the pertinent part of the business’s taxable supplies will belong to the person. who acquires the business and the same is supposed to be considered when calculating turnovers. The person who acquires the business will consider the turnover of the supplies made by themselves. And not on the supplies made by the previous owner.

Although there are some exceptions all businesses must keep in mind the importance of paying VAT on time. They must know how is it applied and where is it applied. If everything is not sorted out from the very start, it may create several complications for the businesses.

Consulting VAT consultants in the UAE may solve several problems for foreign business holders. This is because they are the ones having very little knowledge regarding VAT. And the criteria of its implications in the UAE. They thus require proper help from the authentic VAT experts in UAE.

VAT Consultant in Dubai

Being an internationally recognized firm. FAR is the best solution for businesses. Who is seeking help regarding VAT and its applications? It will help you right from business registration to carrying out all the functions related to VAT in the UAE in a proper manner. Their VAT team comprises GCC VAT compliance-certified experts. They know when and how the business needs to incorporate VAT legally. And to avoid the penalties and fines.

Contact them and gain more insight regarding the VAT registration procedure in Dubai and to check the validity of VAT registration number. This will help you sustain your business as per the legalities 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.