FTA Explains VAT Enrollment Of ‘Sole Establishments’

The UAE which has become synonymous with luxury malls, shopping arcades and glitzy hotels introduced series of reforms to make it a more business friendly nation.

The UAE introduced Value Added Tax (VAT) on January 1, 2018 and the rate of VAT is 5 percent. The basic idea of introducing VAT was to provide the UAE government with a new source of income which will be utilized to provide high-quality public services. From time and again The UAE Federal Tax Authority or FTA has made many clarifications to enable the citizens to have clarity on VAT related issues.

Once again FTA had clarified that a single a person owning many sole establishments may only obtain one tax registration for all these sole establishments, and there is no need to have registration for each establishment separately.

In a further clarification The FTA clarified that a sole establishment is a business entity which is owned 100 percent by a natural person.  

The FTA expressed that this public explanation doesn’t have any significant bearing to a One-Person Company LLC or other similar legal entities, which are seen as distinct and separate legal persons from their owners. To avoid any doubt it can be noted that a company cannot own a sole establishment.

The FTA clarified that, in specific cases the tax registrations by the taxpayers are reviewed with regards to sole establishments and if the corrective measures to be taken, such persons will be informed.

The taxable supplies made by a natural person, in addition to its sole establishment(s), are considered COLLECTIVELY to determine if the person exceeded the VAT registration threshold of AED 375,000.

A natural person must inform the FTA of any undeclared output tax by submitting a voluntary disclosure in accordance with Federal Law No. 7 of 2017 on Tax Procedures, for example when he/she disregarded any of his/her sole establishments or taxable supplies made in personal capacity for VAT purposes.

This incorporates occasions where an individual neglected to enroll for VAT on the premise that the obligatory VAT enlistment limit was not surpassed on an independent premise by that normal individual or his sole establishment(s).

The FTA further clarified that it requires the common individual to tell the Authority on the off chance that it neglected to enroll for VAT and make the vital remedial move to represent any exceptional VAT.

If you have any query related to VAT enrollment of sole establishments in UAE then feel free to call +971 4 4542366 today for a quality consultation or please send inquiry to info[at]flyingcolour[dot]com.

Please Note: This article was published on 28th April 2021. The information provided in the article is based on the policies and rules applicable at the time of writing it. Talk to one of our consultants for any recent update or change.