Who Should Register for VAT in the UAE? Eligibility Rules

Whether a business needs to register for VAT in the UAE depends mainly on its taxable supplies, imports, expenses, residency status and the applicable registration threshold. UAE-resident businesses must register when their taxable supplies and imports exceed AED 375,000, while voluntary registration may be available once the AED 187,500 threshold is met. Non-resident businesses have different rules and may need to register regardless of turnover when they make taxable supplies in the UAE, and no other party is responsible for accounting for the VAT.

Who must register for VAT in the UAE?

Here is the list of people who must register: 

Existing UAE-resident businesses

A UAE-resident business making taxable supplies must register for VAT when the value of its taxable supplies and imports exceeds AED 375,000 over the previous 12 months. Registration is also mandatory if the business expects to exceed this threshold within the next 30 days. The AED 375,000 mandatory threshold applies to UAE-resident businesses. Businesses should assess taxable supplies and imports rather than simply looking at overall revenue.

New companies and startups

A new business does not automatically have to register simply because it has been established in the UAE. Its registration position depends on the nature and value of its taxable activities.

A startup that has not reached the mandatory threshold may still qualify for voluntary registration if it meets the AED 187,500 threshold based on taxable supplies, imports or taxable expenses.

Example: A startup has AED 120,000 in taxable sales but AED 210,000 in taxable setup expenses. Since its taxable expenses exceed AED 187,500, it may potentially qualify for voluntary registration, provided the other conditions are met.

Non-resident businesses

Non-resident businesses require special consideration because the AED 375,000 registration threshold does not apply to foreign businesses.

A non-resident business making taxable supplies in the UAE generally needs to register regardless of the value of those supplies unless another person in the UAE is responsible for accounting for the VAT due on those supplies. Therefore, it is not accurate to state that every non-resident business must register regardless of its circumstances.

The nature of the supply and who is responsible for accounting for VAT should be assessed before determining the registration obligation.

Freelancers and sole establishments

Freelancers and sole establishments should assess their VAT position based on the taxable activities they conduct rather than their business label alone.

Where a natural person operates multiple sole establishments, the FTA states that these businesses are registered under one Tax Registration Number (TRN), and the registration threshold is considered based on the combined activities of the sole establishments owned by that person.

Free-zone companies

Being established in a UAE free zone does not automatically exclude a business from VAT registration.

A free-zone business should assess its taxable supplies, imports and other relevant activities against the applicable VAT rules. If it meets the mandatory registration conditions, it may be required to register even if it operates from a free zone.

Businesses making only zero-rated supplies

Businesses that make only qualifying zero-rated supplies may be able to request an exemption from VAT registration.

However, this is not the same as saying that all zero-rated businesses are automatically exempt from registration. The FTA specifies conditions for requesting an exception, including that the business makes only zero-rated supplies and does not import goods or services subject to the reverse charge mechanism.

A business that makes zero-rated supplies together with standard-rated supplies is not eligible 

for this particular exception.

Businesses making exempt supplies

Exempt supplies should not be treated in the same way as zero-rated supplies when assessing VAT registration eligibility.

The VAT registration threshold is based on taxable supplies and imports. Businesses whose activities are limited to exempt supplies may therefore have a different registration position and should assess their activities against the applicable VAT rules.

VAT registration eligibility in the UAE at a glance

Answer the following questions to understand whether your business is required or eligible to register for VAT in the UAE.

1. Does your business make taxable supplies or have taxable imports in the UAE?

• No: VAT registration may not be required. Check whether your activities involve exempt supplies or another category with specific VAT rules.
• Yes: Continue to assess your business’s residency and registration threshold.

2. Is your business resident or non-resident in the UAE?

• UAE-resident business: Mandatory VAT registration generally applies when taxable supplies and imports exceed AED 375,000, or are expected to exceed this amount in the next 30 days.
• Non-resident business: The AED 375,000 threshold does not apply. If the business makes taxable supplies in the UAE, registration is generally mandatory unless another person in the UAE is responsible for accounting for the VAT.

3. Has a UAE-resident business exceeded AED 375,000 in taxable supplies and imports?

• Yes: VAT registration is mandatory.
• No: Consider whether the business is expected to exceed the threshold in the next 30 days.

4. Is the UAE-resident business expected to exceed AED 375,000 in the next 30 days?

• Yes: VAT registration is mandatory.
• No: Consider whether the business qualifies for voluntary VAT registration.

5. Does the business meet the voluntary registration conditions?

• Yes: If its taxable supplies and imports, or taxable expenses, exceed AED 187,500 over the previous 12 months or are expected to exceed this amount in the next 30 days, the business may be eligible for voluntary VAT registration.
• No: VAT registration may not be required at this stage.

6. Does the business make only qualifying zero-rated supplies?

• Yes: The business may be able to request an exemption from VAT registration, subject to meeting the FTA's conditions.
• No: Assess whether the business makes exempt supplies or falls under another VAT registration category.

Note: An exemption from VAT registration for businesses making only qualifying zero-rated supplies is different from making exempt supplies, which should be assessed separately.

How VAT registration rules apply in different scenarios

Here are some of the key VAT registration scenarios:

Scenario 1: Resident business above the mandatory threshold

A UAE-resident trading business has taxable supplies and imports exceeding AED 375,000 over the previous 12 months.

Outcome: The business meets the mandatory registration threshold and must register for VAT.

Scenario 2: Resident startup below the mandatory threshold

A UAE startup has not reached AED 375,000 in taxable supplies but has taxable expenses exceeding AED 187,500.

Outcome: It may be eligible for voluntary registration, provided the other conditions are satisfied.

Scenario 3: Non-resident supplier

A business based outside the UAE makes taxable supplies in the UAE. The value of its supplies is below AED 375,000, and no other person in the UAE is responsible for accounting for the VAT.

Outcome: The AED 375,000 threshold does not protect the non-resident business from registration. It may have a mandatory registration obligation because it makes taxable supplies in the UAE and no other person is responsible for the VAT.

Scenario 4: Business making only qualifying zero-rated supplies

A business makes only supplies that qualify for zero-rating and meets the FTA's conditions for an exception.

Outcome: It may request an exemption from VAT registration, subject to FTA approval.

Mandatory vs voluntary VAT registration vs exemption

Which businesses can request a VAT registration exemption?

A business that makes only qualifying zero-rated supplies may request an exception from VAT registration if it meets the FTA's conditions. This can apply to certain businesses involved in activities such as qualifying exports, international transportation, and other supplies that fall within the zero-rated categories. However, the exemption is conditional and should not be confused with simply having turnover below the mandatory threshold.

Can a business register below the mandatory threshold?

A UAE-resident business that does not meet the mandatory registration conditions generally does not have to register. However, it may still be eligible for voluntary registration if it meets the AED 187,500 threshold based on taxable supplies, imports or taxable expenses. Businesses should continue to monitor their taxable activities because exceeding the mandatory threshold, or expecting to do so within the next 30 days, can create a registration obligation.

Conclusion

Understanding who should register for VAT in the UAE can help businesses avoid missed registration obligations and stay compliant with the applicable VAT rules. Whether you are a UAE-resident business, non-resident supplier, startup, freelancer or free-zone company, assess your taxable supplies, imports and expenses based on the rules that apply to your business.

TallyPrime can help businesses streamline accounting and manage their financial records more efficiently, so you can spend less time on manual processes and more time running your business.