Understanding UAE VAT: Who Needs to Register and How It’s Done

Planning to start or already running a business in the UAE? Then it's important to learn how VAT affects your operations. VAT was launched in the UAE in January 2018 to support economic diversification away from oil reliance. Since then, VAT compliance has become a legal responsibility for eligible businesses.

In this guide, you'll find comprehensive information on VAT in the UAE, including eligibility, registration steps, and how to stay compliant. The language used is simple and clear so that even someone with a basic understanding of business can follow along.

What is VAT?

The majority of goods and services sold are taxed by the government under VAT regulations. It is collected at each stage of the supply chain and is ultimately paid by the final consumer. Businesses registered for VAT act as intermediaries to collect taxes for the government.

In the UAE, a five percent VAT is levied on transactions that meet the taxable criteria. This means if a business sells a product worth AED 1,000, an additional AED 50 is charged as VAT, making the total price AED 1,050. It is the responsibility of businesses to collect VAT from customers and transfer it to the Federal Tax Authority.

 

Who Needs to Register for VAT in UAE?

VAT registration applies only to eligible businesses in the UAE. VAT registration depends on the business's taxable turnover over the last year or its expected revenue in the coming month.

Mandatory VAT Registration

VAT registration is mandatory for businesses whose taxable turnover and imports surpass AED 375,000 annually. This amount marks the mandatory registration threshold.

Voluntary VAT Registration

A firm generating taxable supplies within the AED 187,500 to AED 375,000 bracket can choose to register for VAT, even if not required by law. This is beneficial for startups and small businesses that want to appear professional and recover input tax on expenses.

Exempted Businesses

There is no VAT registration requirement for businesses earning less than AED 187,500 in taxable supplies annually. However, you must monitor your revenue regularly to know when you cross the threshold.

Types of VAT Supplies in UAE

There are several kinds of supplies recognized under VAT regulations:

1.     Taxable Supplies: Goods and services that are liable to a 5% VAT rate.

2. Zero-rated Supplies – Goods/services that are taxed at 0%, such as exports and certain healthcare or educational services.
3. Exempt Supplies – Supplies that are completely exempt from VAT, such as certain financial services and residential properties.

What is TRN (Tax Registration Number)?

The Federal Tax Authority provides your business with a specific Tax Registration Number (TRN) upon successful VAT registration. This number is a 15-digit identifier for your business and must be displayed on all tax invoices and official communication with clients and government departments.

Documents Required for VAT Registration

To apply for VAT registration in the UAE, make sure you have these documents ready:

• Copy of valid trade license
• Identification passports of the owner and all partners involved in the company
• Emirates ID of owner and partners
• Contact details (mobile number and email)
• Bank account details
• Income proof (sales invoices, bank statements)
• Memorandum of Association (if applicable)
• Custom details (if dealing in import/export)

Having these documents ready before you begin registration will save time and avoid errors.

Step-by-Step VAT Registration Process in UAE

VAT registration is conducted online through the official Federal Tax Authority portal in the UAE. Here is a step-by-step guide:

Step 1: Start Your VAT Registration by Registering on the FTA Platform

Visit the Federal Tax Authority’s website at www.tax.gov.ae and sign up with your email and a strong password.

Step 2: Access the FTA Portal to Begin Your VAT Registration

When your account is ready, log in and begin the VAT registration process.

Step 3: Fill in Business Information

Provide general details like:

• Legal name of the entity
• Trade license number
• Business activity
• Business sector

Step 4: Provide Financial Details

Enter the turnover amount your business has generated over the last year and expects in the following 30 days. It supports the FTA in evaluating whether your business needs to be registered for VAT.

Step 5: Provide Details of Import/Export Activities

If your business deals with import or export, you must provide customs details and port information.

Step 6: Upload Supporting Documents

Attach all the required documents mentioned earlier. Check that your documents are clear and contain up-to-date details.

Step 7: Review and Submit

Double-check all information entered and then click the "Submit" button. The FTA will review your application.

If the submitted details are complete and correct, the FTA will send your TRN via email within 5 to 20 business days.

What Happens After VAT Registration?

Once your business is registered for VAT, you must follow certain rules and responsibilities:

1.     VAT Charging – A standard 5% VAT must be charged on all taxable goods and services.

2. Issue Tax Invoices – Every sale must include a proper VAT invoice with TRN.
3. File VAT Returns – Submit your VAT return every quarter through the FTA portal.
4. Maintain Records – Keep records of all sales, purchases, and VAT calculations for at least five years.
5. Pay VAT on Time – You must pay the VAT collected to FTA by the deadline to avoid penalties.

How to File VAT Returns?

VAT returns in the UAE are generally filed every three months. You need to:

• Log in to your FTA account
• Fill out your sales (output VAT) and purchase (input VAT) data accurately.
• Calculate the net VAT payable
• Submit the return and make payment online

If your input VAT surpasses your output VAT, you have the option to carry the remaining amount forward or claim a refund.

Penalties for Non-Compliance

Failing to follow VAT regulations in the UAE may lead to heavy penalties. Here are some examples:

• AED 10,000 for not registering when required
• A penalty of AED 1,000 for late VAT return submission, which rises to AED 2,000 if repeated.
• Late payment penalties ranging from 2% to 4% of the unpaid tax
• AED 5,000 for issuing incorrect invoices

To avoid penalties, make sure your business meets all VAT compliance requirements.

Can You Cancel VAT Registration?

Yes, VAT deregistration is possible if your business stops trading or no longer meets the voluntary registration threshold. You must ensure all VAT returns are filed and dues are cleared before applying for cancellation.

Why Should Small Businesses Register Voluntarily?

There is a common misconception among small businesses that VAT registration isn’t necessary unless it’s mandatory. However, voluntary registration has its own advantages:

• Helps in building trust with clients
• Helps your business offset VAT paid on goods and services
• Enables you to work with larger companies that require TRN

·         Proves your business is genuine and conducted professionally

How Can IrhaBiz Help?

Registering for VAT and ensuring regular compliance can be time-consuming, especially for new business owners. This is where a trusted business service provider like IrhaBiz can assist.

IrhaBiz offers:

• VAT registration and TRN acquisition
• Submitting VAT reports accurately before the due date
• Record-keeping and document preparation
• VAT deregistration if required
• Full support for VAT audits or government inquiries

Leave the complexities of VAT and taxation to us, so you can focus fully on expanding your business.

Conclusion

Following VAT guidelines is now a necessary duty for businesses in the UAE. Whether your business is small or large, understanding your VAT responsibilities can help you avoid penalties and maintain a good reputation. Registering for VAT is not complicated if you follow the right steps and submit accurate information.

If you are unsure about the process or want expert support, IrhaBiz is here to help. Our team can guide you through registration, filings, and compliance so your business stays legally secure and professionally managed.

Need help with VAT registration in UAE? For reliable VAT compliance support, contact IrhaBiz and secure expert advice for your business.