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VAT Registration for UAE Sole Establishments: What Does the FTA Clarification Say

VAT registration in the UAE is a mandatory legal obligation for taxable persons whose taxable supplies and imports exceed AED 375,000 per annum. Apart from the mandatory registration obligation, the taxable persons can initiate voluntary VAT registration in the UAE if their taxable supplies and imports exceed AED 187,500 per annum. However, there were some uncertainties regarding the VAT registration obligation of the sole establishments. Since a natural person can operate multiple businesses under different sole establishment (sole proprietorship) license, the key question was whether the natural person should file a separate VAT registration for each of his sole establishment businesses.

The Federal Tax Authority (FTA) has issued a public VAT clarification to remove the uncertainty regarding the VAT registration obligation of sole establishments. As per the VAT clarification No VATP021, the natural person can file for single VAT registration for each of his sole establishment businesses in the UAE. Registered tax agents in Dubai, UAE would help the sole proprietors successfully navigate the intricacies of the registration process.

VAT Registration for Sole Establishment Businesses

In the UAE a sole proprietorship or sole establishment is considered as a type of legal structure that doesn’t have a legal personality different from its owner. A natural person can own different sole establishments for different lines of businesses. Also, a legal person such as a corporate entity cannot own a sole establishment.

The FTA clarifies that each person can obtain only VAT registration in the UAE for all of his sole establishment. Therefore, separate VAT registrations should not be sought for the different sole establishments of the same owner.  In such cases, the VAT registration should be ideally filed in the name of the natural person who owns the sole establishments.

If the natural person wants to file for VAT registration under the name of one of their sole establishments, he can apply to the FTA accordingly. Further, the taxable supplies by a natural person and the sole establishment should be considered collectively to determine the VAT registration obligations. Owners of the sole establishments can hire registered tax agents in Dubai to file the VAT registrations in the wake of the new public clarification.

How to Determine the UAE VAT Registration Obligation?

If a natural person owns one or more sole establishment, the value of supplies made by the natural person and all its sole establishments must be aggregated to assess whether the VAT registration threshold has been exceeded. Consider the below example,

Mr Anwar is the sole owner of a beauty salon in Dubai and he also owns a stationery shop under another sole establishment license in Dubai. The individual annual turnover of both the businesses for the last 12 months doesn’t exceed the VAT threshold of AED 375,000. However, in this case, he should consider the turnover over of both of the establishments together to determine the VAT registration obligations even though the individual turnover of the sole establishments is below the threshold.

Review of previous VAT Registrations in the UAE

In some cases, a natural person may have received separate VAT registrations for different sole establishments. The FTA will review such registrations in certain cases and inform the taxable persons about the corrective steps they need to take. The business owners, however, are not required to take actions to amend the VAT registration until specifically directed by the FTA. Registered tax agents in Dubai can help the owners of the sole establishments with advice on the previous VAT registrations.

What the Sole Establishments Should Do?

In light of the new VAT clarification, the owners of the sole establishments are required to,

1. Ensure all Taxable Supplies are Declared

If a VAT registrant disregarded any of his sole establishments or his taxable supplies, he should inform the FTA of any undeclared output tax by submitting a voluntary disclosure under Article 10(1) of the Federal Law No. 7 of 2017 on Tax Procedures.

2. Take Corrective Action for Outstanding VAT

If the natural person didn’t register for VAT even though the aggregate values of taxable supplies exceed the mandatory registration threshold, he is required to notify the FTA and corrective action must be taken to account for the outstanding VAT.

3. Follow the Clarification for UAE VAT Registration

The FTA expects the owners of all the sole establishments to follow the Public Clarification for all future VAT registration applications.

Hire Registered Tax Agents in Dubai for VAT Registration

The rules regarding VAT registration in the UAE has been riddled with certain ambiguities for the persons who own sole establishments. With the new public clarification, the FTA has effectively cleared the air on the process of VAT registration as the Authority states that the natural persons who own multiple sole establishments need to obtain only one VAT registration for all of their sole establishments. Registering VAT in the UAE is an intricate process, especially for the sole establishments and this requires the assistance of registered agents in Dubai, UAE. Jitendra Chartered Accountants (JCA) has a team of highly qualified tax agents in Dubai who assist business owners in effectively registering their businesses for VAT.

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