VAT Registration Threshold Computation in Dubai, UAE
VAT registration threshold computation in Dubai, UAE is a vital topic for all businesses. VAT is a tax on the use of goods and services. It’s collected at each point of sale. The end consumer always bears the cost. Businesses collect VAT and pay it to the government.
VAT was introduced in the UAE on 1 January 2018 at a 5% rate. It gives the UAE a steady source of income. The money helps the government offer public services and reduce dependence on oil revenues.
Threshold Limit in UAE VAT
The VAT law sets clear limits for registration.
- A company with annual turnover above AED 375,000 must register for VAT.
- A company with turnover between AED 187,500 and AED 375,000 may register voluntarily.
This rule ensures that only active businesses take part in VAT registration.
Computation of VAT Threshold Turnover
To check if a company must register, it should add:
- Taxable supplies (domestic sales)
- Zero-rated supplies
- Imports
- Reverse charge supplies
Exempt supplies are not included.
Example:
| Type of Supplies | Turnover in AED |
|---|---|
| Taxable Supplies | 500,000 |
| Imports | 50,000 |
| Zero-Rated | 200,000 |
| Reverse Charge | 42,000 |
| Exempt Supplies | 30,000 |
Taxable turnover = 500,000 + 200,000 + 50,000 + 42,000 = AED 792,000.
Since AED 792,000 is above AED 375,000, VAT registration is mandatory.
Exclusions for VAT Threshold Computation
When a business is acquired, the turnover of the old owner before acquisition is not counted. Only taxable supplies after the new owner takes over are added.
This ensures the new owner isn’t liable for the past figures of the business.
Guidelines for VAT-Registered Businesses
A VAT-registered business must:
- Charge VAT on taxable goods and services.
- Reclaim VAT paid on eligible expenses.
- Maintain proper financial records.
- Report VAT collected and VAT paid regularly online.
If VAT collected is higher than VAT paid, the difference must be paid to the FTA. If VAT paid is more, the excess can be reclaimed.
Penalties for VAT Non-Compliance
The UAE imposes heavy fines for VAT violations.
- Failure to register: AED 20,000
- Prices not inclusive of VAT: AED 15,000
- Late filing: AED 1,000 first offence, AED 2,000 after
- Failure to issue invoice: AED 5,000 each
- Failure to issue credit note: AED 5,000 each
- Record violations in designated zones: AED 50,000 or 50% of tax
- Failure to notify margin scheme: AED 2,500
These penalties show why compliance is crucial.
VAT Refund for UAE Nationals Building Residences
UAE nationals can claim a special refund when building new residential property.
Conditions:
- Applicant must be a UAE national.
- Building must be new.
- Building must be for residential use only.
Process:
- Submit refund form with documents to [email protected].
- FTA reviews and gives a reference number.
- Refund application must be filed within 6 months of completion or move-in.
Eligible costs include:
- Building materials like bricks, tiles, cement, timber
- Contractor services
- Architect and engineering services
- Air conditioning units, plumbing, and wiring
- Paint, doors, flooring, alarms, and lifts
Excluded costs include:
- Furniture, curtains, blinds, carpets
- Appliances like cookers
- Landscaping such as trees and grass
- Garden furniture and ornaments
Role of Mubarak Al Ketbi (MAK) Auditing in VAT Computation
Mubarak Al Ketbi (MAK) Auditing helps companies manage VAT services in Dubai. Our experts know VAT law and registration process in detail. We provide reliable VAT support and ensure businesses stay compliant.
Our VAT services include:
- VAT registration & deregistration
- VAT filing & payment
- VAT compliance & control
- Data entry & financial management
We also deliver:
- CFO services
- Auditing services
- Bookkeeping services
- Tax filing services
- Due diligence
Our team saves businesses time and reduces mistakes in VAT processes.
What Can Help 🥇
Mubarak Al Ketbi (MAK) Auditing supports businesses in Dubai with VAT registration threshold computation and compliance services. We ensure your VAT process is smooth, legal, and stress-free. Remember, “an ounce of prevention is worth a pound of cure,” because timely VAT compliance saves bigger losses later.
- For more information visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Contact/WhatsApp: +971 50 276 2132
