Registering for VAT Dubai, UAE

A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.

Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.

Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.


Voluntary registration

Voluntary registration is an option available to businesses which do not have a turnover in excess of the Mandatory Registration Threshold but would still like to be registered for VAT. There are a number of reasons why a business may choose to voluntarily register for VAT, for example:  to be able to recover VAT on their expenses;  to ensure that any incurred VAT does not become embedded in their pricing, therefore forcing the business to increase prices because they cannot recover the VAT incurred; and  to obtain the TRN to obtain cash flow advantages when purchasing goods from outside the UAE (by being able to use the reverse charge). A person can voluntarily register for VAT if:  at the end of any month, the total value of the person's taxable supplies and imports, or their expenses which were subject to VAT, in the previous 12 months exceeds the Voluntary Registration Threshold of AED 187,500; or  the total value of the person's taxable supplies and imports, or their expenses which are subject to VAT, in the next 30 days is expected to exceed the Voluntary Registration Threshold of AED 187,500. A voluntary registration is effective from the first day of the month following the month in which the application is made, or from such earlier date as may be requested by the person and agreed by the FTA. 


Designated Zones UAE for VAT

The VAT ER defines a Designated Zone (DZ) as follows:

  • Having a specific fenced geographic area and security measures and customs controls in place to monitor entry and exit of individuals and movement of goods to and from the DZ.
  • Having internal procedures regarding the method of keeping, storing and processing of goods.
  • The operator of the DZ complies with the procedures set by the FTA.

Certain benefits/ issues have been created by the distinction of DZs from the regular free zones:

  • A DZ that meets the conditions specified in the VAT ER shall be treated as being outside the State.
  • No VAT for transfer of goods between designated zones, subject to certain conditions.
  • Transfer of goods from one entity to another within the same DZ, as long as it part of a supply chain and not meant for final consumption by the receiving entity, will not be subject to VAT.
  • For provision of services, being in a DZ offers no locational advantages, as VAT is chargeable at the standard rate.

The FTA released a list of 20 areas as DZs in the first week of January. The list is given below:

Abu Dhabi

  1. Free Trade Zone of Khalifa Port
  2. Abu Dhabi Airport Free Zone [ADAFZ]
  3. Khalifa Industrial Zone [KIZAD]

Dubai

  1. Jebel Ali Free Zone (North-South) [JAFZ]
  2. Dubai Cars and Automotive Zone (DUCAMZ)
  3. Dubai Textile City
  4. Free Zone Area in Al Quoz
  5. Free Zone Area in Al Qusais
  6. Dubai Aviation City
  7. Dubai Airport Free Zone [DAFZ]

Sharjah

  1. Hamriyah Free Zone [HFZ]
  2. Sharjah Airport International Free Zone [SAIFZ]

Ajman

  1. Ajman Free Zone [AFZ]

Umm Al Quwain

  1. Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
  2. Umm Al Quwain Free Trade Zone on Shaikh Mohammad Bin Zayed Road

Ras Al Khaimah

  1. RAK Free Trade Zone [RAKFTZ]
  2. RAK Maritime City Free Zone
  3. RAK Airport Free Zone

Fujairah

  1. Fujairah Free Zone [FFZ]
  2. Fujairah Oil Industry Zone [FOIZ]