VAT registration in the UAE is mandatory once your taxable supplies and imports over the previous twelve months exceed AED 375,000, or you expect them to exceed that in the next thirty days. Voluntary registration opens at AED 187,500 of taxable supplies or taxable expenses.
What counts towards the threshold
- Standard-rated sales at 5%
- Zero-rated sales, which still count even though no VAT is charged on them
- Imported goods and services subject to the reverse charge
- The value of relevant business assets sold
Exempt supplies, such as certain financial services and bare land, are not included. This is where businesses most often miscalculate: they assume zero-rated exports do not count, and register late as a result.
It is a rolling twelve months, not your financial year
The test looks back over any rolling twelve-month period, so you can cross the threshold in the middle of your financial year. Once you cross it, you have thirty days to apply, and late registration carries an AED 10,000 penalty.
Should you register voluntarily?
Voluntary registration lets you recover VAT on rent, equipment and other business costs, which suits a business investing ahead of revenue. The trade-off is quarterly returns, record-keeping and the discipline of charging VAT to customers who may not be registered themselves. It is worth doing the arithmetic rather than following the general advice.
If all your sales are zero-rated
A business whose supplies are entirely zero-rated can apply to the FTA for an exception from registration, which removes the need to file VAT returns. The cost is that it cannot recover input VAT, so compare both routes before applying.
Questions we are asked about this
How long does VAT registration take?
The FTA usually reviews a complete application within around 20 business days. Missing or inconsistent documents cause most delays.
Can I charge VAT before my TRN is issued?
No. You can only charge VAT and issue tax invoices once you have your Tax Registration Number.
What if I registered but my turnover has dropped?
You may be required or able to deregister. There is a 20 business day deadline once you become eligible, so check your position rather than leaving the registration open.
Need help with this? VATAXSYS, VAT and Tax Consultant, handles vat registration for businesses across the UAE. Call +971 55 240 3135 or message us on WhatsApp for a free consultation.