Compliance requirements under VAT

Tax Registration thresholds under VAT

Annual Turnover Registration under VATA
More than AED 375,000/- Mandatory
Between AED 187,500 & AED 375,000/- Optional
Less than AED 187,500/- Not required

For startups, if the VAT attracted expenses are more than AED 187,500/, (USD 50K) such companies have to be registered under the UAE VAT law.

The above Tax slab is calculated as under:

  • The total value of supplies made by a taxable person for the month in which he is applying for VAT registration and the previous eleven months.
  • The total value of supplies of the subsequent 30 days on which he is applying for VAT registration.
  • If in any of the above two options, the turnover is more than AED 375,000/- the company has to register for VAT.
  • For the calculation purposes of the turnover for VAT registration, value of exempted supply will not be considered.

Taxable person under GCC VAT Agreement

Taxable Person means any person who carries out economic activities to generate income.

  • Such person is registered or obliged to register for VAT as per the registration threshold in a member state.
  • Taxable person can include businesses located outside the GCC territory.
  • Taxable person can be any individual person conducting an economic activity.

Registration for VAT

A taxable person as per the UAE VAT law can register in the third quarter of the year 2017. It is mandatory to get registered by every taxable person under the VAT registration platform before the end of the year 2017.

What is Tax Group / VAT Group?

Two or more persons that are residents of the same member state to register for VAT as a Tax Group. Such group will be treated as a single entity for compliance of UAE VAT law. Entities can register as VAT Group if:

  • Each person has a place of establishment or a fixed establishment in the UAE.
  • The persons are “related parties” and
  • either one person controls others, or two or more persons from the partnership control the others

Entities within one VAT Group are treated as one entity for the UAE VAT purpose.
Supplies made between members of a VAT Group will not be considered as a transaction under UAE VAT. Further, one entity cannot be part of more than one VAT group.

Record Keeping

It is mandatory for every taxable person to maintain books of accounts under UAE VAT law. In addition to that the authority can ask for additional documents such as, annual accounts, general ledger, purchase day book, invoices issued, invoices received, credit notes, debit notes, VAT Ledger etc.

Under the UAE VAT law the books of accounts and records are to be maintained for five years.