In UAE, many tax-free zones are open to foreign investors. However, it is important to comply with the government’s tax laws so that the government recognizes your business. VAT registration in Abu Dhabi is mandatory for most businesses. This will ensure that your business is recognized by the government and can attract investment.
VAT is an indirect tax:
VAT is an indirect tax on all taxable goods and services. Registered sellers collect this tax on behalf of the government. However, certain goods and services are exempt from VAT. This type of tax has three variants: the income variant, the consumption variant, and the gross product variant. For example, the income variant includes the tax on all purchases of raw materials and components, while the gross product variant includes only purchases of products and services.
It is not mandated for all businesses:
VAT registration in Abu Dhabi is voluntary and is not mandatory for all businesses. However, businesses with an annual turnover exceeding AED 375,000 are required to register. Businesses with annual turnovers of less than AED 187,500 are also eligible for voluntary registration. While most businesses find voluntary VAT registration beneficial, it’s not mandatory.
It is not tax-free:
The VAT registration process in Abu Dhabi is not free. The application for VAT registration requires several documents, including business documents. It also asks for projections and turnover figures. The application also asks for the expected values of exports and imports. It takes about 20 days to process the application. If the process is delayed or incomplete, the business will be penalized with a fine of AED 10,000.
It is not mandatory to register:
If you don’t have an establishment in UAE, it’s optional to register for VAT in Abu Dhabi. However, you must register for VAT if you supply goods or services locally. You’ll need to submit documents to prove your business. The form asked for information on your business’s projected turnover and expected import and export values.
However, consider registering if your taxable turnover exceeds AED 187,500. Failure to register will result in an administrative penalty of Dh20, 000.
It is not allowed to have more than one Tax Registration Number (TRN):
A tax registration number is a 15-digit number that sets a business apart from others. It also serves as a way to communicate with purchasers and suppliers. The FTA issues TRNs to businesses. The TRN should appear on all documents related to transactions.