The Value Added Tax (VAT) in the UAE plays a significant role in generating revenue for the government. According to the VAT law, businesses exceeding the specified threshold are required to register for VAT and obtain a unique identification number, also known as the Tax Registration Number or VAT number in UAE. This number is crucial for businesses as well as authorities as it ensures transparency and accuracy in VAT compliance and allows the government to identify VAT-registered entities, track their transactions, and collect appropriate taxes from them.
The Federal Tax Authority (FTA) is the regulatory body that verifies the registration application of businesses and issues them their UAE VAT number. It administers the overall VAT system in the UAE.
Introduction of VAT in the UAE
Under the Federal Decree-Law No. 8 of 2017, VAT was implemented in the United Arab Emirates w.e.f 1st January 2018. Also known as the Consumption Tax, VAT is an indirect tax imposed on saleable goods and services at each stage of the supply chain. The registered entity collects the tax money from the end consumer of the supply chain and remits it to the government.
This tax system was introduced in the UAE to diversify the income sources of the government so that the collected VAT is utilized in delivering excellent public services, including education, healthcare, social services, public transportation, etc.
VAT rates in the UAE
Although the standard rate of VAT announced by the FTA is 5%, a few goods and services are categorized under zero-rated supplies and exempt supplies where no tax is imposed.
Standard-rated supplies – Applies a 5% VAT rate on almost all goods and supplies.
Zero-rated supplies – Imposes 0% VAT on specific services such as a few education services, healthcare supplies, goods and services exported outside the GCC, precious metals such as gold and silver, and international transportation, etc. Under the UAE VAT system, businesses making zero-rated supplies can claim relevant input tax.
Exempt supplies – Residential properties, undeveloped lands, public transport services, life insurance, and certain financial services. These supplies are fully exempted from VAT and can not even claim input tax.
VAT number in UAE
VAT number or Tax Registration Number in UAE is a unique 15-digit numeric identifier assigned by the FTA to businesses that are registered for VAT. To obtain a UAE VAT number, businesses are required to do the following:-
- Check if the business income meets the registration threshold – It is mandatory for businesses exceeding an annual taxable supply of AED 375,000 to register for VAT. There is also an option for voluntary VAT registration for businesses with an annual taxable supply between AED 187,500 and AED 375,000.
- Gather the necessary documents – The necessary documents required for the VAT registration process include the business license, passport copies, financial statements, and other relevant documents as required by the FTA.
- Register on the FTA portal – To initiate the registration process, visit the online portal of FTA and follow the defined steps. Provide the requested details and submit. The business is also required to pay a non-refundable fee for VAT registration.
Upon submission, the FTA will review the application and verify the submitted documents and information. If satisfied, the authorities will register the business for VAT and issue a VAT registration certificate containing the VAT number or Tax Registration Number (TRN).
The VAT number issued to companies has no expiration date and therefore, remains valid until the business maintains its registration status. Once registered, the business is required to comply with the relevant regulations in order to maintain the VAT number. Companies without a VAT number cannot charge and collect VAT from their consumers.
Further, the businesses are required to mention this number on various documents, such as –
- Invoices issued to the customers – VAT-registered businesses must display the VAT number on invoices issued to the customers while making a sale.
- Receipts provided for taxable supplies – Receipts provided by retailers and service providers on supplies where VAT is charged.
- Other documents related to VAT transactions – Credit notes issued by the registered businesses. Some businesses also display their TRN number on their official website, company brochures, and business cards.
Documents required to obtain a VAT number in UAE
The following documents are required for VAT registration in the UAE:-
Business documents – Certificate of Incorporation; Memorandum of Association (MOA); Articles of Association (AOA); Trade license
ID proof – Passport copies and Emirates ID of the directors, partners, and authorized signatories of the company
Contact information – Proof of authorization/Contact details of the applicant
Financial documents – Bank statements confirming the bank account details of the company; Audited financial statements or financial reports as proof of financial status
Other requirements – Description of business activities; Nature of supplies; Details of Customs registration/ Custom Code Certificate; Power of Attorney; Partnership Deed; Details of any export or import undertakings
Importance of VAT Number in UAE
Confirming the validity of the VAT number is essential for many reasons:-
- Compliance with regulations – To ensure compliance with UAE VAT regulations, businesses with an annual turnover above AED 375,000 are required to register for VAT. Only VAT-registered businesses can claim VAT paid on purchases.
- VAT reclamation – To reclaim VAT paid on purchases from other VAT-registered suppliers, businesses must register themselves with the FTA and obtain a VAT number. Further, this number must be listed on the invoice for a successful VAT reclamation.
- Avoid penalties – Using an invalid VAT number during VAT reclamation may result in the rejection of the claim request, further leading to penalties. However, using a valid TRN ensures compliance and prevents fines.
- Fraud prevention – The VAT number signifies the legitimacy of the business and protects it from potential scams. Providing an invalid VAT registration number is considered a fraudulent activity.
- Business transparency – Having a valid VAT number in the UAE fosters transparency in business transactions, aiding in the prevention of tax evasion and fraud. Verified VAT numbers ensure that the suppliers and customers are dealing with reliable and compliant entities.
- Business reputation – TRN helps in building trust and credibility in business dealings. Customers and investors are more likely to deal with companies that are legally registered for VAT and have a valid VAT number in UAE.
In any case, if the VAT number provided by the supplier is not valid, then you can follow these steps:-
- Confirm the VAT number by contacting the supplier and seeking clarification.
- Request for a new invoice with the correct VAT number.
- If the VAT is charged without a valid registration number, report it to the FTA.
- Retain all correspondence and invoices to justify VAT claims or face an FTA audit.
Get expert help to obtain your VAT number in UAE
Shuraa Tax Consultants and Accountants will serve as a trusted tax agent to help you register for VAT and obtain your UAE VAT number. They provide expert guidance and assistance in handling the complexities of tax compliance. In addition, they will help you prepare the necessary documents and submit them through the FTA’s online portal.
Through their extensive experience and knowledge of UAE’s VAT system, they can assist you throughout the registration process, thereby assuring accuracy and adherence to FTA guidelines. Moreover, they provide ongoing support to ensure that businesses maintain compliance and optimize their tax strategies in accordance with the VAT law.
Need help with VAT compliance in the UAE? Contact Shuraa Tax today!
