What is vat registration

VAT Registration is considered as a fundamental part in an organization as it boosts the business profile, averts financial penalties and assists to grab a mass market. A business which has been registered for VAT will eventually acquire a unique number delivered by the authority, known as the tax registration number (TRN). All of the taxable persons who are presently residences in the UAE and whose value of yearly supplies in the UAE surpasses or is anticipated to go beyond the mandatory registration threshold should enroll for VAT in UAE. A penalty up to AED 20,000 will be expected if any discrepancies will be performed by an organization.

VAT Registration in UAE

Being registered under the VAT law implies that a business is recognized by the government, as a provider of Goods and Services and is approved to gather VAT from customers and remit the same to the government. Only VAT registered organizations will be permitted to do the following:

  • Charge VAT on taxable supply of products and services
  • Claim Input Tax Credit on VAT paid on their purchases, which will be subtracted from VAT liability on sales
  • Payment of VAT to the government
  • Periodic filing of VAT return

Apart from above mentioned, all registered businesses need to align their business reporting structure in line with the compliance requirements like accurate and updated books of accounts, credit notes, tax paid documents such as Tax invoice, debit notes, records to every inward supplies and outward supplies etc. are needed to be maintained.

Therefore, understanding the fundamentals of VAT will be one of the significant steps for your VAT preparation and getting VAT registration will be the initial move towards transiting your businesses to the VAT era.

How is VAT collected?

VAT-registered businesses gather the amount on behalf of the government; consumers bear the VAT in the form of a 5 per cent increment in the cost of taxable goods and services they purchase in the UAE. UAE imposes VAT on tax-registered organizations at a rate of 5% on a taxable supply of goods or services at all progression of the supply chain. Tourists in the UAE likewise pay VAT at the point of sale.

On which businesses does VAT apply?

VAT applies similarly on tax-registered organizations managed on the UAE mainland and in the free zones. However, if the UAE Cabinet defines a specific free zone as a ‘designated zone’, it should be treated as outside the UAE for tax purposes. The transfer of goods between delegated zones are tax-free.

Implication of VAT on individuals

VAT, as a general consumption tax, will apply to the most of transactions in goods and services. A limited number of exemptions may be allowed. Thus, the cost of living is likely to increase slightly, but this will vary depending on an individual’s lifestyle and spending behavior. On the off chance an individual spends mainly on those things which are relieved from VAT, he is unlikely to see any significant increase. The government will incorporate rules that require businesses to be clear about how much VAT an individual is needed to purchase something.

Implication of VAT on businesses

Businesses will be liable for carefully archiving their business income, costs and related VAT charges. Registered organizations and traders will charge VAT to all of their clients at the prevailing rate and incur VAT on services/products that they buy from suppliers. The contrast between these entireties is recovered or paid to the public authority

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