When must a UAE company register for VAT, and how does registration work?

The threshold is measured on the value of your taxable supplies and imports. Taxable supplies are sales that carry VAT at the standard 5% rate and sales that are zero-rated, such as exports outside the GCC. Goods and services you import into the UAE for the business count as well.

Exempt supplies, such as most residential leases, and supplies outside the scope of VAT do not count towards either threshold. A business whose income is mostly exempt can therefore stay below the threshold even with a large turnover, so it helps to sort your income into these categories from the start.

There are two separate tests, and either one can make registration mandatory.

• The look-back test. At the end of every month, total your taxable supplies and imports for the previous 12 months. If the total is above AED 375,000, registration is mandatory.
• The look-ahead test. If you expect your taxable supplies and imports in the next 30 days alone to exceed AED 375,000, for example because you have signed a large contract, registration is mandatory now.

The second test is the one new companies tend to miss. A company with small sales so far can still be required to register in its first months if a single confirmed order or contract takes it over the threshold. Once either test is met, the application is due within 30 days.

A business can register voluntarily when its taxable supplies and imports, or its taxable expenses, exceeded AED 187,500 over the previous 12 months or are expected to in the next 30 days.

Counting expenses is what makes this useful for start-ups. A new company with high setup and fit-out costs but little revenue yet can register, charge VAT on its sales and recover the VAT it paid on those costs. The trade-off is the paperwork: a registered business issues tax invoices, keeps VAT records and files a return for every tax period. Weigh both sides, and remember that customers who are not VAT registered will pay 5% more.

A free zone licence does not take a company out of VAT. A free zone company that makes taxable supplies above the threshold registers like any other business. Some free zones are classed as designated zones with their own VAT treatment for certain goods, and the detail depends on the zone and the transaction, so check it with your tax adviser.

Businesses based outside the UAE that make taxable supplies here can be required to register whatever the value, because the AED 375,000 threshold does not apply to them.

• Sign in to EmaraTax, the Federal Tax Authority platform, with UAE Pass and create a taxable person profile for the company.
• Complete the VAT registration form with the company details, the business activities as they appear on the trade licence, and the turnover figures for the last 12 months and the next 30 days.
• Add the bank details and customs information, if you trade in goods and hold a customs registration.
• Upload the supporting documents, listed in the next section, and submit the application.
• Answer any questions from the Federal Tax Authority, which may ask for more evidence of turnover.
• Receive the VAT registration certificate, which shows your tax registration number (TRN), the effective date and your first tax period.

Entries that do not match the licence or the supporting documents are a common reason for questions, so keep the activity descriptions and figures consistent. Our VAT registration in the UAE page explains how Caliph prepares the application for you.

• Trade licence
• Passport copy and Emirates ID of the owner or authorised signatory
• Memorandum of Association or other proof of the signatory's authority
• Turnover figures for the last 12 months, with supporting invoices or contracts
• Expected turnover for the next 30 days, where you are registering ahead of the threshold
• Company bank account details, if the account is already open
• Details of imports and exports and your customs registration, if you trade in goods
• Company address and contact details

If you are still setting up, our guide to documents for business setup in Dubai covers the earlier stages.

From the effective date on the certificate, you add 5% VAT to your taxable sales and issue tax invoices that show your TRN. You keep your purchase invoices, because they support the VAT you recover. The Federal Tax Authority assigns your tax period, quarterly for most smaller businesses, and each return is filed on EmaraTax with any payment within 28 days of the end of the period.

VAT registration is separate from corporate tax. A company registered for VAT must still register for corporate tax, as our guide to corporate tax and VAT for new companies explains. If you sell online, our guide on e-commerce licences in Dubai shows how the licence and VAT fit together.