What happens if you don't register for VAT in Dubai?

[ShillGates]

375000 vat turnover.
Declaration letter that the company has no standard Rated Supplies" if your company has no taxable supply?


only things ratable are invoices issued to local companies.

so if you invoice 5 million usd to a client in usa, this doesnt count.
if you invoince 400k aed to a local freezone or mainland ON TOP, then yes it counts. BUt only this 400k aed IF EXEMPT.

ratable turnover..... in uae when exporting a "service" its not exemplt, they say its 0%. So while no vat is due, its admin work and counts towards the threshold. Heaven knows why they implemented it like this

 

[turtle]

375000 vat turnover.
Declaration letter that the company has no standard Rated Supplies" if your company has no taxable supply?


only things ratable are invoices issued to local companies.

so if you invoice 5 million usd to a client in usa, this doesnt count.
if you invoince 400k aed to a local freezone or mainland ON TOP, then yes it counts. BUt only this 400k aed.

ratable turnover.....

This is completely wrong. 0% rated exports are taxable supplies and count for the threshold.

 

[ShillGates]

Indeed @turtle Ill correct, 0% rated exports are a taxable supply, just that the vat rate rate is 0% therefore counts to your threshold indeed. Ill clarify that the UAE implemented somewhat different rules vs rest of world. For example a service supplied in uk to a b2b outside uk is exempt from vat rather than 0%.

Exempt means no vat applicable at all
0% means vat is due but its zero rated therefore 0
HOWEVER there are many caveats, so not all "exported" services are vatable. For example telecommunications and electronic services (such as digital marketing most likely, guidance still needed) will be regarded as a supply outside the UAE so not vat as its out of scope (exempt).

so every situation is unique....

 

[sergeylim88]

@turtle
i am well aware of that, i was just making a comment on uplana's post

so what's the procedure to get exempt? any advices how to do this most efficient?

 

[turtle]

@turtle
so what's the procedure to get exempt? any advices how to do this most efficient?

VAT exempt and VAT exception are different things. If you're 100% sure that you won't have any supplies or VAT subject imports, then proceed with the VAT registration and request an exception. You must log in to the FTA portal and complete the form. The form is interactive and will guide you but don't forget to tick the box for VAT exception.

 

[sergeylim88]

so not too complicated?

 

[John Noel]

@John Noel any updates on VAT exemption?
any advice how to do it right??

tbh I left the process unfinished

 

[sergeylim88]

did you struggle with something?
what proofs do you have to provide to get the vat registration exception?

 

[Lopt Farbauti]

There was a honest suggestion to a UAE FZ company owners not to register for a VAT and @Fred declared that 99% of the companies do not do it according with his personal experience, so I believe he as well as his customers did not register their companies for a VAT also.

Though CIT is here now, so at least accounting supposed to be done and at most audit.

Therefore I am wondering, what do you think are a possible solutions for those who did not register for VAT (but reached 375K+ threshold) in a following two cases:

1. A company liquidation (audit will show 375K+ turnover)
2. Accounting reports submission (it will also show 375K+ turnover)

Let's keep in mind, the longer owner keeps a silence ignoring a VAT registration, the more penalties one gets in case information will be revealed.

 

[USDT]

Let's keep in mind, the longer owner keeps a silence ignoring a VAT registration, the more penalties one gets in case information will be revealed.

Why do you think that penalties will increase over time? Won't they be limited to a penalty of 10,000 AED for non-registration?

 

[kekmaw]

Why do you think that penalties will increase over time? Won't they be limited to a penalty of 10,000 AED for non-registration?

There is a penalty for each quarter you fail to file VAT for as well so it's definitely not capped at 10k. I know, I paid for a few years of none filings.

 

[Lopt Farbauti]

Why do you think that penalties will increase over time? Won't they be limited to a penalty of 10,000 AED for non-registration?

Actually there is a chance to avoid more penalties (except AED 10,000) as I heard if you register as a VAT exempt, but need to prepare a reasonable answers. I had a talk with one of accountants and he confirmed that after giving some explanations to tax authority several of companies were able to avoid those additional penalties. Anyway it would be good to hear how @Fred is solving this little issue for his devoted customers, because it looks like a one time penalty of AED 10,000 becomes the best solution now. What is a way to have Fred's attention here? May be I am wrong and he has an ace up his sleeve.

 

[USDT]

There is a penalty for each quarter you fail to file VAT for as well so it's definitely not capped at 10k. I know, I paid for a few years of none filings.

10k for each quarter?
And ss the 375k threshold set for turnover or supplies only?

 

[kekmaw]

10k for each quarter?
And ss the 375k threshold set for turnover or supplies only?

No, not 10k per quarter. I'm sure you can google how much it is as I don't recall but I think it was like 2k per quarter or something along those lines.

 

[emihunter]

If I understand it correctly, after $100,000 of revenue a year you will have to register for VAT in Dubai.
But as all the revenue is coming outside of UAE, there wouldn't be any VAT required to be charged.

What's the worst thing that can happen if I decide to not register for VAT?

Hi OP, did you end up registering? And has anyone got the VAT exception if sales are all zero rated?

It is required to charge VAT zero rated, unless you can get an exception which for instance I did not get.

do you know why you did not get exception? and what happened when you didn't get exception?

 

[uplana]

Wouldn't you think the same thing happens as in all other countries, you start with a warning along with a fine, and if you continue not to pay your VAT, they'll slaughter you!

 

[emihunter]

This is not legal advice, but my experience:

Better to register if you cross the threshold even if you don't do any business in UAE. I registered late by mistake and had to pay a fine for it.

Filling the VAT every 3 months is very easy if you don't do business in UAE, you just put zeros everywhere except in the field for business with zero VAT. There you put the total money you did in the period in AED. Takes literally 10 minutes to do.

do you remember how much fine you had to pay? it says 10k aed but I heard there'll be additional penalties based on the transactions and how late you registered

 

[EliasIT]

They will put you in a hole, gather around the hole, and throw stones at you.

 

[emihunter]

There is a penalty for each quarter you fail to file VAT for as well so it's definitely not capped at 10k. I know, I paid for a few years of none filings.

were your supplies standard rated or zero rated? how much in fines did you end up paying? this is quite worrying for me...

 

[ecool]

were your supplies standard rated or zero rated? how much in fines did you end up paying? this is quite worrying for me...

In my case were zero rated. I never paid VAT and I don’t have to pay VAT as all supplies are zero rated, but doesn’t matter. You register late or you file the return late (even being zero rated supplies) and you get a fine…

Also just saw your post asking how much I paid. For me it was years ago when they introduced VAT so I don’t remember exactly but was for sure more than 10k. But since then, things have changed regarding fines, so it might be different now