Implications of VAT Registration for UAE Sole Establishments
Natural persons having different business establishments can follow the provisions of sole establishments under UAE VAT law to optimize their time and efforts in completing the tax-related functions. FTA has published specific guidance with respect to sole establishments which is further discussed in detail below.
What is meant by a sole establishment under UAE VAT law?
A sole establishment is described in other words as sole proprietorship which is 100% owned by a natural person. It is a type of ownership legally allowed for business and the sole establishment does not carry another legal identity different from its owner. A natural person can own more than one sole establishment and all the sole establishments under a natural person put together will be considered as the same as the natural person when tax formalities are considered.
Is VAT registration mandatory for sole establishments?
Requirement for VAT registration depends upon the volume of taxable supplies and FTA has specified threshold limits for both mandatory and voluntary tax registrations. Any natural person owning sole establishments shall assess the volume of his/her taxable supplies, considering all the establishments together, to compare with the registration thresholds. Once the aggregated amount of taxable supplies of all the sole establishments exceeds or is expected to exceed the mandatory registration threshold which is AED 375,000 per annum, VAT registration should be obtained.
Should each of the sole establishment register for VAT separately?
A natural person owning multiple sole establishments needs to obtain only one VAT registration on behalf of all his establishments. Hence no separate registration is required for each of the sole establishments.
Is filing of VAT return mandatory for sole establishments?
All VAT-registered entities including registered natural persons who have sole establishments should file the periodic VAT returns with FTA. Whether to file the VAT return monthly or quarterly will be as notified by FTA, once registered. VAT returns can be filed using the e-portal service facilitated by FTA. For further clarifications regarding the filing of VAT returns, feel free to contact CDA.
Should each of the sole establishment file VAT return separately with FTA?
Once VAT registered, all of the sole establishments of a natural person will be assessed together as one taxable entity and hence separate VAT returns are not required. Each registered natural person can submit one VAT return for every tax period as applicable and declare the transactions of all his/her establishments in a consolidated manner. Outstanding tax payable or refund due shall also be calculated in this consolidated level based on the declared amounts of transactions in the VAT return.
What are the mandates to be followed by the owners of sole establishments?
Owners of sole establishments are expected to remain updated about the clarifications issued by FTA on registration and reporting requirements of sole establishments. They shall ensure all their sole establishments are considered while evaluating whether the number of taxable supplies in aggregate reaches the mandatory registration threshold. They shall ensure that there are no undeclared taxable supplies and in case of any outstanding VAT corrections, FTA shall be notified on time as specified in the tax regulation. Especially while incorporating new establishments, tax regulatory responsibilities shall be revisited to ensure compliance with the requirements in every aspect.
Consequences of non-compliance with the VAT registration and reporting requirements relating to sole establishments
It is always recommended to consult with a tax expert to ensure compliance with the regulatory requirements. What if a natural person omits the responsibilities regarding registration and reporting? There can be circumstances where a person missed to consider one of his sole establishments while evaluating the taxable supplies to compare with the VAT registration threshold or another scenario of wrong calculation of outstanding VAT payable. In any such situation, the natural person shall notify FTA through voluntary disclosure or other procedure as applicable to prevent any non-compliance with the tax accounting and to avoid further consequences such as penalties.
How CDA can help you in tax and accounting related activities of your sole establishments?
Are you getting overwhelmed with managing your multiple business concerns and their respective regulatory requirements? CDA has dedicated professionals in each of the competencies such as accounting, tax, audit and compliance who can assist you in carrying out your business transactions in a systematic and controlled environment. We have subject matter experts who can guide you in understanding and fulfilling your regulatory responsibilities starting from registration to periodic reporting to the authorities.
Hope you have a clear idea of the implications of VAT registration for UAE sole establishments. Still, have queries regarding VAT registration of sole establishment in UAE? Contact CDA, we are happy to discuss with you on the recent developments in the context of tax rules and provide you with insights on implementing the best practices in the region.