Implications of UAE VAT Registration with Retrospective Effect

VAT compliance obligations will apply from the effective registration date.

• Illustration

1 March 2023 - Taxable Person became liable to register                                 for VAT.

31 March 2023 - Deadline to submit VAT registration application (30 days)

1 November 2023 - Submits VAT registration application (late registration)

1 December 2023 - Approval of VAT registration effective 1 March 2023

What are the VAT Implications?

1.    Retrospective VAT compliance obligations (starting on effective registration date)

a)    Charge VAT on taxable supplies made

b)   Issue tax invoices to customers

c)    File VAT returns and pay VAT payable, if any

In the example, these actions must be implemented from 1 March 2023, even though the VAT registration approval is received on 1 December 2023.

2.    Administrative challenges

a)    Review of contractual arrangements with customers to collect VAT.

b)   Replacement of the document initially issued to customers. 

3.    Administrative penalties

a)    Late VAT registration – AED 10,000

b)   Late VAT return filing 

                                               i.          AED 1,000 for the first time

                                             ii.          AED 2,000 in case of repetition within 24 months  

c)    Late payment of VAT payable

                                               i.          2% of the unpaid tax due on the day following the due date of payment

                                             ii.          4% monthly thereafter 

4.    How can Crowe Help?

• Analyzing whether taxpayers need to register mandatorily.
• Determining when the taxpayers are liable to register for VAT.
• Assisting on how to submit application to register for VAT.