Implemented on January 1, 2018, Value Added Tax (VAT) helps UAE reduce its dependency on oil revenue. The government introduced VAT at a standard rate of 5% on most goods and services. Additionally, the VAT system also requires businesses to adhere to the regulations and meet certain obligations outlined in the VAT law, such as VAT registration. Since failing to follow the rules can invite legal penalties, it’s essential to understand the VAT obligations, the procedures, and the legal requirements, including the VAT registration fees in UAE.
VAT Registration in UAE
The thresholds of VAT registration defined by the Federal Tax Authority (FTA) are as follows:-
Mandatory VAT Registration – Businesses and individuals with an annual taxable turnover exceeding AED 375,000 must mandatorily register for VAT in the UAE.
Voluntary VAT Registration – Businesses and individuals with an annual taxable turnover below AED 375,000 but exceeding AED 187,500 can opt for voluntary registration. This benefits businesses by giving them the right to reclaim VAT on their expenses.
Companies can initiate their VAT registration process digitally on the FTA portal. They need to set up an online account on the site and fill out the VAT registration form. In addition, they are also required to submit a few essential documents, including-
- Business License
- Passport or Emirates ID of the owner and the manager of the company
- Passport or Emirates ID of the authorized signatory, if any
- Proof of authorized signatory
- Documents stating the turnover in the last 12 months
Once the application for registration is approved by the authorities, a VAT certificate is issued verifying that the company is officially registered for VAT under the UAE’s VAT decree.
VAT registration fees in UAE
Registration for VAT is free in the UAE. However, to get an attested registration certificate, you may have to pay an amount. Similarly, there might be penalties if you don’t adhere to the tax rules.
VAT registration in UAE is mandatory for all those involved in manufacturing or producing goods and services. The process can be overwhelming, especially for new and small ventures. This is where the tax specialists from Shuraa Tax come to the rescue. They offer affordable VAT registration services and manage the entire process from the beginning to the end.
Other than the basic registration fees, businesses may have to pay additional fees in certain circumstances. For instance,
- Group registration fees: Multiple businesses that are part of a group are required to pay a group registration fee.
- Late registration fees: Businesses that fail to register for VAT within the specified timeline may be subject to late registration fees.
It is to be noted that the VAT registration fees in UAE are subject to change over time. Therefore, it is always better to consult with professionals such as Shuraa Tax to stay updated on the VAT registration fees.
Penalties for non-compliance with VAT regulations in the UAE
The FTA has imposed strict legal punishments for businesses that fail to comply with the specified VAT regulations. These punishments are established to ensure that businesses meet their tax obligations. Here’s a breakdown of the common VAT penalties imposed by the FTA on businesses:-
Failure to register for VAT – Businesses that fail to register for VAT within the time frame decided by the FTA will be subject to a penalty of AED 10,000.
Late filing of VAT returns – Businesses that file their VAT returns late will have to incur a penalty of AED 1,000 for the first offense and AED 2,000 for subsequent late filings within 24 months.
Late payment of VAT – Businesses that delay their VAT payments will have to incur 2% of the unpaid tax immediately after the due date and 4% if it is not paid within 7 days. If the businesses still continue to delay their due payments, they will have to pay 1% daily up to a maximum of 300% of the unpaid tax.
Submission of incorrect VAT returns – If businesses submit incorrect VAT returns, they can be charged penalties based on the amount of unpaid tax and the nature of the error. However, the general penalty would be AED 1,000 for the first time and AED 2,000 in case of repetition.
Failure to maintain proper records – Businesses must maintain financial and VAT-related records for at least five years. Failing to do so can lead to considerable fines of AED 10,000 for the first offense and AED 20,000 for repeated violations.
Failure to display prices inclusive of VAT – If businesses fail to display all prices inclusive of VAT, they will have to pay a fine of AED 5,000.
Failure to issue invoices – Businesses are required to issue VAT-compliant invoices for every taxable transaction made. Non-compliance can invite a penalty of AED 2,500 per invoice.
Other VAT penalties – FTA also imposes penalties for other violations such as tax evasion, providing incorrect information, or hindering an audit by the authorities. The legal consequences may vary depending on the range of violations.
Consequences of repeated violations – Repeated offenses or non-compliance can lead to more severe consequences, penalties, business suspensions, or other actions by the authorities.
It is to be noted that the penalty amounts are subject to change depending on the nature and extent of the non-compliance. Hence, businesses that engage in repeated non-compliance may have to face stricter penalties.
Tips to avoid VAT penalties
Businesses in the UAE need to understand and comply with VAT laws in order to stay away from any legal matters. Here are some key strategies that can help businesses stay compliant with the regulations:
- Accurate record-keeping – Businesses must ensure to maintain detailed records of all VAT-related transactions, such as invoices, receipts, and payments. They can consider using a reliable accounting system to keep track of input and output taxes.
- Timely submission of VAT returns – To avoid late submission penalties, businesses must ensure to file their VAT return on time. In addition, using VAT compliance software can help them prepare and submit returns accurately.
- Understanding VAT laws – Businesses must consult with tax professionals such as Shuraa Tax to stay updated on UAE’s VAT laws and regulations.
- Issuance of proper invoice – While making a sale, businesses must ensure to issue correct and complete invoices including all the necessary details such as the date of sale, invoice number, details of the seller and buyer, description of goods or services, quantity, price, and VAT amount.
- Effective internal controls – To prevent errors and fraud, businesses must implement strong internal controls. In addition, they must frequently review and update internal controls to ensure their efficiency.
Seek Shuraa Tax for VAT Registration and Compliance
With their expert guidance, Shuraa Tax Consultants and Accountants can make VAT registration and compliance simple and hassle-free. They ensure accurate VAT return filings and provide ongoing compliance support to protect businesses from legal consequences.
Their team of professionals assists businesses in upkeeping records and staying updated on the current tax regulations. Moreover, they provide tailored solutions to meet the business’s specific needs and handle all their VAT obligations so that they can fully focus on growing in compliance with the law.
Get in touch at info@shuraatax.com and obtain further details on VAT registration fees in UAE.
