Demystifying VAT Services in Dubai: From Registration to Filing Returns

The implementation of value-added tax (VAT) in the Federal Tax Authority (FTA) regime of the United Arab Emirates (UAE) is a watershed moment for businesses in Dubai, and in the Emirates generally. Since its rollout on 1 January 2018, at a standard rate of 5 %, VAT has added a layer of regulatory obligation for businesses, as well as an opportunity for improved compliance, transparency and (where applicable) input-tax recovery. 

In this blog, we unpack (if you will) the full lifecycle of VAT services in Dubai, from registration to ongoing compliance and filing returns, to help business owners, finance teams and advisors navigate the path with confidence.

Introduction: The importance of VAT in Dubai

VAT is a consumption tax applied to the supply of goods and services (and on certain imports) given by VAT consultants in Dubai. Its aim is to transfer the tax burden to the end consumer whilst permitting businesses to recover the VAT they have paid on eligible purchases (input VAT) against the VAT they have collected on their sales (output VAT).

For companies located in Dubai (and across the UAE), complying with VAT means: 

• Registering with the FTA, either when needed or when opting in voluntarily. 
• Issuing compliant VAT invoices, applying the appropriate rate (standard, zero or exempt), and collecting VAT where needed. 
• Maintaining sufficient business records and support. 
• Filing VAT returns on a periodic basis and paying the FTA. 
• Considering penalties and enforcement for not complying. 

In summary, tax shouldn’t be seen as a single event but rather a continuous process of compliance. Getting it right helps with credibility, lowers the cost of non-compliance and helps a business run smoothly. 

Step one: Determining if registration is required 

Mandatory vs Voluntary registration 

One of the first questions businesses need to determine is “Do I need to register for VAT?” In the UAE context: 

• Mandatory registration: A business will be obliged to register if it made between AED 375,000 in taxable supplies and imports in the last 12 months or in the next 30 days. 
• Voluntary registration: If a business does not reach the mandatory threshold, but exceeds AED 187,500 in taxable supplies or taxable expenses, the business can choose to register voluntarily. 
• Non-resident businesses: If non-UAE businesses supply goods or services into the UAE, and it does not have anyone in the

Importance of Registration

When you register, there is a set of duties you accept and benefits it causes:

• You must charge VAT on taxable supplies, issue tax invoices, keep records, and file returns.
• You become entitled to recover input VAT (subject to the rules) on your business purchases and imports.
• If you should have registered and have not, you would be subject to penalties.

Documents & Process

The registration process for businesses requires several documents, including your trade licence, corporate incorporation documents, details of turnover, estimated future turnover/imports, bank account information, etc. 

Registration is conducted online through the FTA’s e-Services portal. The FTA will review and assess the application and issue a Tax Registration Number (TRN).

Key Tips

• Be vigilant to monitor your turnover, and other taxable supply/import values to assess if you cross the registration threshold.
• If your business is expected to grow rapidly (within the next 30 days), you may need to register with the FTA.
• Make sure your business activities, financials and documents paperwork are correct before submitting.
• If you have substantial input VAT to reclaim or are expecting growth, consider voluntary registration if your taxable supplies do not exceed the threshold.

Filing VAT returns in Dubai: Mechanics, Deadlines & Penalties

Next, we will walk you through the mechanics of filing VAT returns, what you need to do, when you need to do it and what the ramifications are if you do not comply.

How To File

You may access the FTA e-Services portal using your TRN and login credentials.

You should complete the relevant VAT Return form (frequently a VAT 201), providing relevant information for the following: 

• Output VAT on your taxable supplies. 
• Input VAT on your qualifying purchases/imports. 
• Net VAT payable (or refundable) = Output VAT less Input VAT. 
• Any other details that need to be declared (i.e., zero-rated supplies, exempt supplies and adjustments). 
• You will need to submit the return online. You will need to pay any VAT arising with the VAT return unless you are; in a refund position or otherwise, you must pay on or before the due date of the return.
• Keep a full copy of all relevant supporting documentation for audit purposes.

Common mistakes

• Not registering if required.
• Misclassifying ineligible supplies (e.g., standard rated or zero-rated or exempt).
• Claiming input VAT where there is entitlement.
• Dates (deadlines) or incomplete return.
• Bad records which will lead to tax audit risk.

Ways to manage filing VAT

• Set up a calendar reminder for when it is due.
• Be sure your accounting system tracks VAT separately (output/input) and supports reconciliation with returns.
• Have supporting invoices and documents organized and readily available. 
• Consider consulting with a VAT-specialist advisor, particularly if the business is complex (e-commerce, designated zones, cross-border supplies).
• Engage in a review internally prior to each return to identify anomalies.

De-registration and Special Circumstances

De-registration

A business can apply to de-register for VAT in certain circumstances. Some of the qualifying conditions are when:

• The business has stopped making taxable supplies and will not make any taxable supplies in the next 12 months. 
• The business’ taxable supplies/imports had fallen below the voluntary registration threshold of AED 187,500 for the previous 12 months and it had been more than 12 months since it voluntarily registered.  
• The application must be submitted on the FTA portal, typically, within 20 business days of satisfying the condition. 
• You must still submit a “final” VAT return showing VAT deregistration and settling any outstanding liabilities. 
• Penalties apply for late deregistration. 

VAT Grouping

If a group of legal entities are under a term of “common control/ownership”, they may be in a position to register as a group for VAT so that the registered group can be treated as one VAT entity, thus reducing complications for them (e.g. inter-group transactions are ignored). 

• Foreign Business / Imports / Designated Zones

Imports of Goods/services into the UAE may be met with VAT liabilities through a “reverse charge” or via the import mechanism, etc., and therefore needs to be considered when dealing with record-keeping requirements. 

• Free-zone entities and ecommerce businesses may more likely be considered with special conditions (keep watch).

Input VAT recovery rules are stricter under some conditions (e.g. exemption for personal use goods, entertaining goods, etc.).

Why Choose Outsourcing or Expert VAT Services Dubai? 

Due to the complexity and continuous nature of VAT compliance and regulations in accounting firms in Dubai and UAE, many businesses either utilize or benefit from the expertise of a specialist VAT consultant and/or agency. Here are some ideas:

• Maintaining awareness with changing regulations, decisions, and FTA guidance.
• Ensuring correct registration, supply classification, and input tax recovery.
• Minimising the risk of penalty through proactive review and internal controls.
• Assistance with system integration (e.g. accounting software) and training staff.
• Providing comfort and peace of mind, while you concentrate on running your business versus tax-administration.

Final thought

If you operate a business and are looking for VAT consultants in Dubai; VAT compliance, education, and proactive thinking about VAT is a management function that should be a priority. Timeous registration, establishment of the correct systems, maintaining careful records and filing accurate, timely returns is well worth the time and effort.