Value Added Tax (VAT) was introduced in the UAE on 1 January 2018 with a rate of VAT 5%. The VAT, as a general consumption tax, will apply to the majority of transactions in goods and services.
UAE imposes VAT on tax registered businesses on a taxable supply of goods or services at each step of the supply chain. VAT registered businesses collect the amount on behalf of the government; consumers bear the VAT in the form of a 5% increase in the cost of taxable goods and services they purchase in the UAE.
VAT for Businesses
Registering for VAT
- A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.
- Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.
- Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.
VAT-related responsibilities of businesses
All businesses in the UAE need to record their financial transactions and ensure that their financial records are accurate and up to date.
Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) are required to register for VAT. Businesses that do not think they should be VAT-registered should maintain their financial records in any event, in case we need to establish whether they should be registered.
Registration and Penalties:
If annual turnover in 12 consecutive months is less than the voluntary registration threshold of Dh187, 500, the company or person may apply for de-registration in 20 days.
Failing to submit de-registration application can lead to the imposition of a fine AED 1000
How to Register VAT on Deskera Books?
Add VAT number under new org creation
While creating a new organisation, under Compliance Details you need to fill in your company’s 15 digit VAT registered number to make your company VAT registered in the system.
Add VAT number under setting option
You also have an another option to add VAT registration number by clicking on the settings, under VAT Details
In the next article: Learn about UAE Tax: Types of VAT Rates