To ascertain whether a business surpasses the mandatory or voluntary registration thresholds in the UAE, the following criteria should be taken into account:
- Taxable Supplies of Goods and Services: This encompasses all supplies of goods and services within the UAE that are subject to a 5% VAT, including zero-rated supplies. It excludes specific notified supplies that are exempt from VAT.
- Reverse Charge Supplies: Reverse charge supplies pertain to notified supplies where the recipient or buyer is responsible for remitting VAT Registration to the government, as opposed to forward charge, where the supplier collects VAT from the buyer and remits it. The value of such supplies must be factored into the turnover threshold for VAT registration.
- Imports: This involves the value of taxable goods and services imported into the UAE, for which the importer is liable to pay tax.
Let’s illustrate the calculation of the VAT turnover threshold using an example:
Rose General Stores is a supermarket in the UAE that deals in groceries and various household products. They also import home furnishing items from other countries and supply them both domestically and internationally. The following types of supplies are made by Rose General Stores.
Type of Supplies | Turnover in AED |
Taxable Supplies (Sale in UAE) | 375,000 |
Exports (Zero-Rated Supplies) | 125,000 |
Exempt Supplies | 50,000 |
Imports | 100,000 |
Reverse Charge Supplies | 25,000 |
To determine Rose General Stores’ eligibility for VAT registration in the UAE, the following should be considered: taxable supplies, exports (zero-rated supplies), imports, and reverse charge supplies. Exempt supplies are not considered when calculating the registration threshold. The registration threshold for Rose General Stores is as follows:
Type of Supplies | Turnover in AED |
Taxable Supplies (Sale in UAE) | 375,000 |
Exports (Zero-Rated Supplies) | 125,000 |
Imports | 100,000 |
Reverse Charge Supplies | 25,000 |
VAT Registration Turnover | 625,000 |
The turnover of Rose General Stores for VAT registration is AED 625,000, which exceeds the mandatory registration threshold of AED 375,000. Therefore, Rose General Stores must undergo mandatory registration under UAE VAT regulations.
Special Scenarios for VAT Turnover Threshold Calculation for Registration in the UAE
- Acquisition of an Existing Business: When someone acquires an existing business, only the relevant portion of the taxable supplies’ value belonging to the acquirer should be considered. The entirety of the supplies made by the previous owner need not be included in the calculation of the turnover for VAT registration. The calculation aligns with the method discussed earlier.
- Related Parties: Related parties refer to two or more individuals or entities not separated on economic, financial, or regulatory levels, with one having control over the others through legal means or the acquisition of shares or voting rights. The determination of the value of taxable supplies in such cases will be specified in the executive regulations of the UAE VAT Registration law, which are yet to be made available.
You can also register VAT Registration in our website:
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