When Should A Company Register For VAT?

Before beginning with anything related to VAT today, let’s recap the basics. Well, VAT is a certain tax applied to the consumption of goods and services. At the point of sale, 5% VAT is levied on it. Simply put, businesses collect these taxes for the government.

Speaking of the UAE, the VAT was brought into consideration on 1st January 2018. Being an integral part of accounting services, the VAT rate in the UAE is 5 percent. To be more precise, VAT offers the UAE government a brand new source of income. However, this income is used to facilitate top-notch public services by the government.

VAT assists the government to move towards its aim of eliminating the dependence on oil and other hydrocarbons in the form of revenue. Today in this guide, you will look into the circumstances under which a company should register for VAT. By the end, you will come across a brief list of several other essential details regarding accounting services and VAT. Let’s begin.

A Quick View On VAT Registration Criteria

Businesses should register for VAT in case their taxable imports and supplies cross AED 375,000 annually. On the other hand, VAT registration is optional for businesses whose imports and supplies cross AED 187,500 per year.

Consequently, the tax that business houses gather from their customers is paid to the government. Simultaneously, businesses receive an immediate refund from the government on tax that it needs to pay to their suppliers.

Foreign businesses can also recover the VAT they get charged for while visiting the UAE.

Process Of VAT Collection

As discussed above, VAT registered businesses collect the total tax on the government’s behalf. Customers pay VAT in the form of a 5% appreciation in the price of all taxable goods, items, and services that they buy in the UAE.

This percentage is fixed by the government. UAE imposes businesses with a 5% tax on the supply of items and services at every supply chain step. Tourists present in the UAE too need to pay VAT at the POS (point of sale).

What Businesses Does VAT Apply On?

VAT applies to all tax-registered businesses equally. This applies to all UAE mainland and free zones. In case the UAE Cabinet declares a particular free zone as a ‘designated zone’ it should be treated as an Exclusion when it comes to taxation in UAE.

Types of VAT Registration

A business can apply for Voluntary registration, exemption from VAT registration, or be mandated to register on the basis of the registration threshold.

Based on this, VAT registration in UAE is divided into three groups

  • Voluntary VAT Registration
  • Mandatory VAT Registration
  • Exemption from VAT Registration

When Should A Company Register For VAT in UAE?

All and every business that crosses the voluntary or mandatory registration thresholds are eligible/need to register for VAT. For hassle-free registration, you can connect with the best VAT consultants in town.

Mandatory VAT Registration

Businesses should register for VAT if:

  • The final aggregate of its taxable imports and supplies crosses the necessary registration threshold. Note that this will be considered over the last 12 months.
  • Businesses feel that the total sum of their imports and supplies exceeds the mandatory registration threshold in the upcoming 30 days.
  • If it crosses a threshold of AED 375,000.

The mandatory threshold is not applicable in the case of foreign businesses.

Voluntary Registration

In case businesses do not fall under the mandatory VAT registration criteria, they can apply for voluntary VAT registration. However, only if:

  • The final sum of its taxable expenses, taxable imports, and supplies in the last 12 months crosses the voluntary threshold.
  • Businesses feel that the final cost of taxable expenses, supplies, and imports will cross the voluntary threshold in the upcoming 30 days.
  • If it crosses a threshold of AED 187,500.


Although the core part of the article is under what circumstances should a company register for VAT, it is important to know the rest. Before taking any decision, businesses need to analyze the type of supplies. This will help them calculate the annual supply turnover to register for VAT in UAE.

That being said, if you are seeking an accounting expert to analyze your business, consult the experts at Accountant Dubai. They are the best VAT consultants in the town that offer brilliant solutions and VAT services.


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