GCC: it's time to register for VAT

With less than three months to go before businesses in the GCC are expected to start accounting for VAT, businesses should be well on the way to being ready. Whilst the Executive Order has not yet been released, the Federal Tax Authority (FTA) is still pushing ahead with its plans to implement VAT.

Registering businesses for VAT
The FTA opened the VAT registration portal on its website on 17 September 2017 for businesses to register in time for the 1 January 2018 VAT launch. Businesses that are required to register for VAT will need to set up an online account on the FTA website and complete the VAT registration form.   
Businesses which do not comply may find themselves subject to financial penalties.

Businesses must register if:
  • the total value of taxable supplies exceeded the mandatory registration limit of AED 375,000 over the past 12 months, or
  • the value of taxable supplies is expected to exceed the mandatory registration limit within the next 30 days.
Deadlines for businesses to register are the following:
  • businesses with an annual turnover of taxable supplies exceeding AED 150 million should register before 31 October 2017;
  • businesses with an annual turnover of taxable supplies exceeding AED 10 million should register before 30 November 2017;
  • all other businesses whose turnover exceeds the VAT registration threshold should be registered before 4 December 2017.
Businesses may apply for registration on a voluntary basis if they do not meet the mandatory registration requirements if:
  • the total value of taxable or taxable expenditures over the past 12 months exceeds the voluntary registration limit, or
  • the value of taxable supplies or taxable expenses is expected to exceed the voluntary registration limit within the next 30 days.
The voluntary registration limit is AED 187,500.
Taxable supplies
The value of taxable supplies for the purposes of VAT registration will include supplies of goods or services in the UAE which would be chargeable to either the 5% rate or the 0% VAT rate.  
Taxable persons
A taxable person who makes only zero-rated supplies may request to be excluded from the mandatory VAT registration requirement although it may be beneficial for them to be registered for VAT if they will be entitled to claim VAT back on costs.
It is important to note that any person, individual, company or partnership which makes taxable supplies may be required to register for VAT if their supplies exceed the VAT registration threshold.
The person needs to establish whether they are considered to be making taxable supplies by way of business.
The concept of business is broad and includes:
  • activities conducted regularly, on an ongoing basis, independently and in any location;
  • industrial, commercial, agricultural, professional, services or excavation activities;
  • anything related to the use of tangible or intangible properties.
Therefore, individuals who receive income from any of the above activities may find themselves liable to be registered for VAT.
Documents required for VAT registration
In order to register for VAT, businesses are expected to be required to submit the following documents:
  • trade licences;
  • documentary proof of ownership;
  • certificate of incorporation;
  • documentary proof of managers;
  • documentary proof of annual turnover;
  • documentary proof of expected expenses;
  • details of trade with other GCC member states;
  • customs registration number, if applicable.
The FTA will conduct tax audits to ensure that taxable persons are paying tax, filing returns and keeping appropriate records. 
Penalties will be imposed for non-compliance as per Cabinet Decision No. (39) of 2017 on Fees for Services Provided by the Federal Tax Authority and Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.
The penalties range from as low as Dh3,000 and go up to Dh50,000 depending on the offences committed by the entities or individuals.
Examples of actions and omissions that may give raise to penalties include:
  • a person failing to register when required to do so;
  • a person failing to submit a tax return or make a payment within the required period;
  • a person failing to keep the records required under the issued tax legislation;
  • tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.
As per the new regulations, if the person fails to keep required records and other information specified in the laws will be fined Dh10,000 in the first instance and Dh50,000 in case of repetition.
The law further states that if the person fails to submit data, records and documents related to tax in Arabic to authority when requested, he would be penalised Dh20,000.
How Moore Stephens can help
VAT will have commercial, administrative and  financial implications for most businesses and could impact profit margins, cash-flow and even business continuity in some instances.
Moore Stephens has decades of VAT and change management experience, and can leverage that knowledge to help you understand and implement VAT. Our team contains Arabic speaking professionals who deal with your VAT registration queries and needs.
For an initial discussion or meeting please, contact one of the VAT implementation team.

Terri Bruce
Anthony Blenkey
Amin Musa
Robert Noye-Allen

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