The UAE implemented 5% VAT in 2018. Understanding when and how to register is essential for any UAE business. Free zone companies are not automatically exempt — your obligation depends on your activities and revenue.
Registration Thresholds
Mandatory registration: when taxable supplies exceed AED 375,000 in the past 12 months or are expected to in the next 30 days. Voluntary registration: when taxable supplies or expenses exceed AED 187,500. You cannot charge or reclaim VAT without registration.
Free Zone VAT Rules
Designated free zones may have special VAT treatment: goods within the zone may be zero-rated, but services are generally subject to 5% VAT. Supply of goods from a free zone to the mainland is treated as an import and subject to 5% VAT. The rules are complex — consult a tax advisor for your specific situation.
Registration Process
1) Create an account on the Federal Tax Authority (FTA) portal. 2) Submit your application with trade license, passport, Emirates ID, and financial records. 3) FTA reviews your application (typically 5-20 business days). 4) Receive your Tax Registration Number (TRN). 5) Start charging and collecting VAT.
Frequently Asked Questions
Do free zone companies need to register for VAT?
Not always. If your taxable supplies are below the mandatory threshold (AED 375,000), registration is optional. However, if you're providing services (not goods within a designated zone), those are likely taxable supplies and count toward the threshold.
What's the penalty for not registering?
Late registration penalty is AED 10,000. Late filing penalty is AED 1,000 for the first offense and AED 2,000 for repeat offenses within 24 months. Not filing at all can result in penalties of AED 1,000-10,000+ per return.
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