There are a number of compliance requirements when starting a new business in the UAE and VAT Registration UAE is one of the most significant ones in case of startups and newly established companies. Knowledge in terms of when VAT registration is necessary, application procedure and subsequent actions after registration will enable businesses to avoid punishment and run effectively on the first day.
This guide provides an overview of VAT Registration UAE of new businesses and startups, their eligibility, documents, registration process and TRN validation in the UAE.
What Is VAT Registration UAE?
VAT registration UAE is a formal procedure of registering a business with the Federal tax authority (FTA), to collect, charge and pay Value Added Tax (VAT) on taxable supplies. On registration, the FTA assigns a TRN number UAE ( Tax Registration Number ), to be quoted on tax invoices and to be used in filing VAT returns.
In the case of startups, VAT registration will safeguard them through legal matters and create a reputation among customers, suppliers, and government officials.
Are New Businesses in UAE Mandated to Register VAT?
Registration of VAT is compulsory or optional based on the turnover of the business in terms of taxability.
Mandatory VAT Registration
New companies should seek VAT Registration UAE in case their taxes on supplies and imports are more than AED 375,000 within a period of twelve months.
Voluntary VAT Registration
Start-ups can voluntarily request VAT registration in case they have a turnover of more than AED 187,500 a year. New businesses would find voluntary registration useful in claiming input VAT on expenses.
VAT Registration UAE Startups: Who Needs to Register?
VAT registration applies to:
- Mainland businesses
- Free zone companies (taxable activities).
- E-commerce startups
- Professional service firms
- Startups in trading and manufacturing.
- Taxable supplies of foreign companies in UAE.
Every startup has to evaluate the business model to calculate the VAT liability correctly.
The VAT Registration Documents UAE
New businesses must prepare the following documents before they begin the process of registering the VAT:
- Trade license
- Emirates ID and passport of proprietors/partners.
- Memorandum of Association (MOA).
- Bank account details Business bank account details
- Expected turnover details
- Registration of customs (where necessary)
The accurate documentation would minimize the chances of rejection or delays in the registration of VAT.
The Process of Step-by-Step VAT Registration of New Businesses
Step 1: Create an FTA Account
Register on the portal of the Federal Tax Authority and open an account of a taxable person.
Step 2: Fill In VAT Registration Form
Give company information, business operations, financials and anticipated turnover.
Step 3: Post Needed Documentations
Include all supporting documents according to the FTA requirements.
Step 4: Submit the Application
Analyze the information and send the VAT registration application.
Step 5: Receive TRN Number UAE
Upon successful VAT registration, the FTA will assign a TRN number UAE.
What Does TRN Number UAE and Why Does It Matter?
TRN is a special number of UAE that is issued upon registering VAT. It is mandatory for:
- Distributing tax invoices that are VAT compliant.
- Filing VAT returns
- Claiming VAT refunds
- Performing TRN verification UAE with suppliers and customers.
In the absence of a valid TRN, no business is allowed to pay VAT.
TRN Checking of New Businesses in UAE
TRN verification UAE enables companies to verify a supplier or customer of the company as registered to pay VAT. To confirm the compliance and not to deal with non-registered entities, startups are advised to confirm TRN numbers regularly.
TRN check is useful in avoiding:
- Incorrect VAT claims
- Fraudulent invoicing
- Audits Compliance risks in audits.
The Most Prevalent VAT Registration Errors That Startups Should Not Make
Delay in opening new businesses is usually caused by:
- Calculation of turnover is wrong.
- Inappropriate business operations.
- Incomplete documentation
- Late registration after going over the limit.
By preventing such errors, one will be likely to have a more seamless process of registering with VAT and minimizes the chances of penalties.
Punishment of Late VAT Registration in UAE
The inability to submit VAT Registration UAE within the deadline may lead to the administrative fines by FTA. New business is expected to keep a check on the turnover and seek registration of VAT as soon as they qualify.
VAT Registration Advantages of a New Business
VAT registration has a number of benefits:
- Compliance with the UAE tax laws.
- Ability to recover input VAT
- Better business reputation.
- Open financial reporting.
- Less challenging transactions with corporate clients.
In the case of a startup, early VAT registration may help in long-term financial planning.
Are VAT Consultants Necessary in Startups?
Although VAT registration may be done online, most startups seek professional help to help them with registration. VAT consultants help with:
- Eligibility assessment
- Document preparation
- Registration of VAT registration.
- TRN verification in UAE support.
- Ongoing VAT compliance
Conclusion
VAT Registration UAE is an important compliance procedure of new companies and startups in the UAE. The knowledge of registration process, TRN number UAE, and TRN verification UAE assists businesses to escape penalties and conduct their business without fear. Voluntary or mandatory, the timely registration of your VAT is a guarantee that your startup is up to date and prepared to grow sustainably.
