VAT Registration for Foreign and Local Company Branches in UAE

As per the Federal Tax Authority (FTA), foreign and Local company branches in the UAE must register for VAT if they meet the set threshold. VAT registration in UAE is necessary for businesses to buy or sell products and goods. If you established the business locally in UAE, you should ensure that your branch is VAT-registered before trading. This article briefly overviews UAE VAT registration and the registration process for foreign and local company branches in UAE.

Filings.ae streamlines VAT registration process with expert assistance!!

What is VAT registration in UAE?

VAT registration in UAE is the process businesses go through to comply with the FTA's Value Added Tax (VAT) system.  Businesses that meet specific annual turnover threshold must register for VAT with the Federal Tax Authority (FTA). Once registered, businesses must collect VAT on taxable goods and services they sell and account for this tax to the FTA. This may involve charging VAT to customers, keeping records of VAT charged and paid, and filing VAT returns.  VAT registration can also be advantageous for some businesses that aren't required to register, as it allows them to claim input tax credits on their business purchases.

What are the VAT registration thresholds in UAE?

There are two VAT registration thresholds in UAE:

• Mandatory Registration Threshold: This applies to UAE-resident businesses that have exceeded AED 375,000 in taxable supplies and imports within the last 12 months or expect to exceed this limit in the next 30 days. Non-resident UAE businesses must register for VAT regardless of their annual turnover limit.
• Voluntary Registration Threshold: Businesses with a taxable turnover below the mandatory threshold (but exceeding AED 187,500) can voluntarily register for VAT.

VAT Registration Process for Foreign and Local Company Branches in UAE

The brief process given below can be used for the VAT registration for foreign and local company branches in UAE,

Step 1: Gather Necessary Documents

Prepare the required documents for the registration application. This typically includes:

• Trade License of the branch in the UAE
• Parent Company Documents:
• Memorandum of Association (MOA) and Articles of Association (AOA)
• Financial statements (might be requested)
• Authorized Signatory Details
• Tax Residency Certificate of the parent company (if applicable)
• Power of Attorney for a local tax representative (if applicable for foreign companies)

Step 2: Online Registration

The registration process is handled electronically through the Federal Tax Authority's (FTA) eServices portal.

Step 3: Application Submission and Review:

Once on the eServices portal, complete the online application form and upload the necessary documents. The FTA will then review your application and documents.

Step 4: Approval and Tax Registration Number (TRN):

Upon successful review and approval, the FTA will issue the branch a Tax Registration Number (TRN). This TRN is crucial for VAT compliance purposes.

VAT Compliance Requirements for Foreign and Local Company Branches in UAE

The following are the UAE VAT compliance requirements for foreign and local company branches, which need to be followed to avoid penalties and legal issues,

• Record-Keeping: Maintaining meticulous records is crucial. This includes sales and purchase invoices with VAT details, import/export documentation, and records of input tax claimed to ensure accurate VAT calculations and support future return submissions.
• VAT Returns: Regular filing of VAT returns (typically quarterly) is mandatory. These returns detail the total value of taxable supplies made during the period, input tax incurred on business purchases with supporting documentation, and the net VAT liability (output tax minus input tax) owed to the authorities.
• VAT Payment: Prompt payment of any outstanding VAT liability calculated based on the VAT return is essential. The Federal Tax Authority (FTA) specifies deadlines for both filing and payment to avoid penalties and potential interest charges.
• Issuing VAT Invoices: Branches must issue VAT invoices for all taxable supplies made. These invoices must display the VAT amount to ensure transparency and allow customers to claim input tax credits where applicable.
• Reverse Charge Mechanism: The reverse charge mechanism might apply in certain situations. This means the recipient of the supply, instead of the supplier, becomes responsible for accounting for VAT. Understanding and applying this mechanism correctly is crucial to avoid errors and potential penalties.
• Customs Procedures: Branches involved in importing or exporting goods may need to comply with specific VAT-related customs procedures. Consulting with a customs broker can help ensure smooth clearance of goods and proper VAT treatment.

Also read: VAT Penalties and Fines in UAE

Conclusion

In conclusion, VAT registration in UAE is mandatory for both foreign and local company branches that exceed the threshold or expect to. The registration process involves gathering documents, submitting an online application, and adhering to ongoing compliance requirements like record-keeping, filing returns, and issuing VAT invoices.

Register your company branch in UAE for VAT with Filings.ae tax experts!!