The implementation of the value-added tax (VAT) system in the United Arab Emirates (UAE) has been accompanied by confusions that are understandable. Obviously, not everyone is aware of what the tax system entails and how it operates, as the country has never encountered this before 2018. It is the first time in UAE’s history that products and services have been taxed. How individuals will obtain a Taxpayer Identification Number (TRN) is likely one of the most pressing concerns people have had until this point.
This may be a query from members of the business community who are inquisitive as to what it is and how to obtain it, as well as residents of the UAE who wish to keep abreast of events in the country and those who wish to register their company as a taxpayer.
Simply, TRN is issued upon completion of VAT registration in UAE. Since 2017, the FTA’s registration portals have been open, and those who missed the initial deadline have been given opportunity to register once the company qualifies for registration requirements. For those who have not attempted registration, the TRN is issued. It is supplied upon completion of the VAT registration procedure.
Role of TRN in the UAE
TRN plays a crucial role in the processing of numerous tax-related documents that enable various businesses to operate in the country and receive various tax benefits. Any business registered for tax purposes in the UAE, especially for VAT, must possess a Tax registration number and a certificate. The tax authority can verify businesses and monitor all their purchases using TRN. They can also view the company’s tax status, ensuring compliance with the new law.
WHAT is TRN’s significance?
TRN registration is a productive, time-efficient, and cost-saving process for both the public and private sectors. It can assist with:
- Reclaiming previously paid taxes on the purchase, production, and processing of a product or merchandise.
- Offering a refund to businesses that have registered for VAT and acquired a valid TRN.
- Recoupment of business purchases through VAT by the purchaser.
- Tax registration number strengthens the credibility and profile of the Company.
According to the UAE’s VAT Law, TRN Verification of all tax documents is required for businesses, including the following:
- Tax Invoice
- VAT Return Tax
- Credit notes
- Other relevant tax documents
What is the value of TRN?
TRN Verification is a measure of compliance established by the UAE VAT Laws. When a company completes the TRN Verification process, the following advantages are provided:
- It provides enterprises with a distinct identity.
- This facilitates communication with the FTA.
- It gives more authenticity to Company’s invoices.
- Organises the compilation of tax-related documents in FTA records.
- It emphasises the compliance aspects of the organisation.
- Instils investor and shareholder confidence and reduces the risk of noncompliance to avoid fines.
- It streamlines communication between the consumer and vendor. It demonstrates an organised and legitimate process for business transactions.
Who is required to register for TRN?
For a business to qualify for VAT Registration and TRN Verification, it must meet the following revenue requirements:
Mandatory Registration
The required registration threshold is AED 375,000.
To avoid penalties and sanctions, a company is required to register for VAT if its revenue and taxable imports in the previous 12 months or in the next 30 days exceeds the threshold.
This threshold is not applicable to foreign companies.
Voluntary Registration
The voluntary registration threshold is AED 187,500.
The company may choose to register for VAT if its annual revenue and imports are greater than AED 187,500 but less than AED 375,000.
If the company’s annual revenue and imports are less than AED 187,500, it is exempt from registering for VAT.
What is the process?
An evaluation of TRN eligibility is required to determine if the business must undergo the procedure. Those who are required to register for VAT can employ tax agents to assist them with the registration procedure.
Within thirty days of crossing registration threshold business must apply for TRN registration process. The procedures required to acquire TRN in the UAE are as follows:
- Log in to the FTA’s e-services online portal to register.
- Click the icon to obtain the comprehensive details.
- Fill out the form for VAT registration.
- Complete each section with the required information.
- Provide the details for confirmation.
What is the intent?
Once registration is completed effectively, the FTA will issue a TRN certificate to the company. Based on this, the company will file its VAT return prior to the stipulated deadline. Businesses with a legitimate TRN can use the certificate to do the following:
- Vendor credibility for listing with large companies, where TRN holder companies are preferred.
- Bank profile
- Representing company to foreign authorities Now, what is the UAE’s VAT?
The Excise Tax was the first tax implemented in October 2017 as part of the tax system. On the first day of January 2018, the VAT was implemented and implemented throughout the entire nation. VAT is a indirect tax charged at each point of sale.
Learn About VAT
This is a consumption tax applied to the price of a product at a specific VAT rate. In the instance of the UAE, the government has chosen to implement one of the lowest VAT rates, which is 5%.
This amount, which will be collected by the enterprises and paid to the government, is borne by the consumers. There are instances in which enterprises may qualify for VAT refunds from the government.
Who are the Businesses Eligible to Register for VAT in UAE?
There are no modifications to the original information that the UAE government provided to enterprises. Those who offer taxable goods and services with an annual revenue, imports of AED 375,000 or more are required to register for VAT, while those who offer taxable goods and services with an annual revenue and imports more than AED 187,500 but less than AED 375,000 may register voluntarily.
What Documents Are Required for VAT Registration in the UAE?
When you decide to register for VAT, you must prepare and digitise a number of documents. These will need to be submitted to the FTA’s portal.
The following documents are generally required for registration, but they may vary or be supplemented depending on the nature of the business, the type of business, and other factors.
It should also be noted that the entire VAT registration process can be completed online, without the need to visit a government office.
What are the consequences of non-compliance?
Any business that registers late will incur a fixed fine of AED 10,000. The FTA will also impose additional penalties on unpaid tax liability based on the date the threshold is exceeded.
If incorrect information is provided or if an error occurs during the registration procedure, the form will be discarded. The company will have to repeat the entire registration process, which will prolong the registration process.
How do I confirm TRN authentication?
Allowing businesses to submit and collect taxes is one of the essential requirements for registering for VAT. Verification of TRNs ensures that businesses charging clients VAT have a valid TRN.
If the consumer pays VAT without TRN verification, they will not be able to claim the VAT return as an input tax credit. An FTA check can be performed by both businesses and individuals to prevent the loss of tax revenue and verify the legitimacy of a company professing to be VAT-registered.
These are the procedures for TRN Verification:
- Visit https://tax.gov.ae/en/default.aspx
- Click on ‘TRN’ icon from the right-side list.
- Enter the business’ TRN in the space provided.
- Enter the Security Code as it appears on the display.
- Click on the ‘Validate’ icon.
- If the number is genuine, the company’s legal name will appear in English and Arabic.
How Shuraa Tax can support you?
To avoid penalties, you can employ a reputable consulting firm that can provide end-to-end solutions for TRN registration, from assessment to procurement.
For a better grasp of the TRN requirements, Shuraa Tax can assist your business in navigating the extensive guidelines of the UAE’s new tax law. With our assistance, you can establish a tax structure for your business that will save you time, mitigate risks, and safeguard your assets. Our team of experienced company tax advisers is ready to help you in preparing for business tax. Call +971 508912062 or send an email to info@shuraatax.com to get in touch with us.
