I have recently been appointed as the manager of a real estate brokerage. The company was established in 2006 but has not had any transactions for the past few years. We are now in the midst of restarting the business, however, we have not registered with the Federal Tax Authority. I understand that businesses have to be registered by the end of April failing which fines will be applied. I am not too sure if we will have all the documents in hand before the end of April as certain approvals are still pending. Do we still need to register with the tax authority bearing in mind we haven't done any business for the past few years. KM Dubai
A business is required to register with the FTA when either the total value of all taxable supplies over the previous 12-month period exceeds the mandatory registration threshold of Dh375,000, or it is anticipated that within the next 30 days the total value of all taxable supplies will exceed the threshold. When either of these two conditions are met you have just 30 days in which to complete your registration. It is worth noting that a taxable supply is not just the value of your taxable sales or revenues, you also have to include the value of taxable goods and services received, unless they also form part of your taxable sales, in which case you can exclude them to avoid any double counting. Goods and services received would also include anything purchased from overseas on which you would have been charged UAE VAT if purchased locally. Remember to also include all sales that are taxable at 0 per cent.
The registration rules are further complicated if you have acquired another business in the last 12 months that has made taxable supplies, or if you have any other businesses under common control or ownership (which are known as related parties). You would also have to include these transactions in determining if you have reached the registration threshold.
Based on the information given in your question and assuming that you are a standalone business which does not have tax grouping obligations, then you do not currently have a requirement to register for VAT. If you are in any doubt please seek professional advice as failing to register when required to do so may result in fines or penalties once the April 30 deadline has passed.
I own a PR business registered in a free zone and my trade license is due for renewal in early May. My first VAT period runs from January 1 to April 30 with my first return due on May 28. Can I reclaim the VAT I will be charged on my license renewal on my first VAT return? SA Dubai
To offset input VAT on your return, the date of supply of any goods or services must be within the VAT return period, which in your case is the four months ending April 30. Your first return and VAT payment is due on May 28 and these additional 28 days from May 1 to 28 allow you time to prepare and submit the return. Any transactions falling in May should not be included in the return.
When deciding which transitions to include in a particular return, the date of supply has to fall strictly within the VAT return period. Article 25 of the Decree Law sets out how to determine the date of supply and in the case of the renewal of your trade licence this would be the date that you make payment or the date on which the tax invoice was issued. Therefore if the invoice for your renewal is issued before the end of April you can account for the input VAT in April and offset it on your first return. If the VAT invoice is dated in May and you make payment in May then you would not be able to offset this input VAT until your subsequent return, which will cover the period May 1 to July 31, with the return submission and payment due before August 29.
Lisa Martin, a chartered accountant with over 20 years commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to email@example.com