Does a non-resident business need to register for VAT in the UAE?

Article 50 Mandatory Registration 1. For the purposes of implementing this Agreement, a Taxable Person shall be obliged to register if : a) he is resident in any Member State; b) the value of his annual supplies in that Member State exceeds or is expected to exceed the Mandatory Registration Threshold. 2. The Mandatory Registration Threshold shall be SAR 375,000 (or its equivalent in the GCC State currencies). The Ministerial Committee has the right to amend The Mandatory Registration Threshold after it has been in force for three years. 3. A non-resident of a Member State shall be required to register in that State regardless of his business turnover if he is obliged to pay Tax in that State under this Agreement. Registration can be done directly or through the appointment of a tax representative with the consent of the Competent Tax administration. The tax representative shall take the place of the Non-Resident Person in all its rights and obligations provided for in this Agreement, subject to the provisions of Article 43(2) of this Agreement. 4. A Taxable Person who makes only zero-rated supplies may request to be excluded from the Mandatory Registration requirement for Tax purposes in accordance with the conditions and provisions determined by each Member State.

2.4.2. Voluntary registration Voluntary registration is an option available to businesses which do not have a turnover in excess of the mandatory registration threshold but would still like to be registered for VAT. A person can voluntarily register for VAT if:7 • • at the end of any month, the total value of the person’s taxable supplies and imports, or their expenses which were subject to VAT, in the previous 12 months exceeded AED 187,500; or the total value of the person’s taxable supplies and imports, or their expenses which are subject to VAT, is expected to exceed AED 187,500 in the next 30 days. It should be noted that a non-resident person is not allowed to voluntarily register on the basis of its “taxable expenses”. 2.5. Place of supply For a supply to be within the scope of the UAE VAT regime, the supply needs to take place in the UAE. If a supply takes place outside the UAE, the supply is treated as outside the scope of UAE VAT and therefore UAE VAT will not apply. Furthermore, such an out of scope supply would not count for the purposes of the registration thresholds discussed above. In order to assist businesses in determining where a supply takes place, the VAT legislation provides a number of “place of supply” rules. These rules are different for goods and services, and may vary depending on a set of specific facts. The specific rules applicable to supplies of goods and services in e-commerce arrangements are discussed in the subsequent parts of this Guide. 2.6. Reverse charge mechanism Under the default VAT rule for accounting for VAT, a supplier of goods or services is liable to account for VAT on any taxable supply, irrespective of whether the supplier is a UAE resident or not. The “reverse charge mechanism” is a simplification measure which allows nonresident suppliers to avoid the need to register for VAT in the UAE when they make supplies of goods or services in the UAE to registered persons. Where the reverse charge mechanism applies, the non-resident supplier will not charge VAT to the recipient. Instead, the VAT-registered recipient must self-account for the VAT in respect of the goods or services received. This means that the recipient must record the VAT on the acquisition as output tax at the applicable rate in their systems and declare it in their VAT return. This output tax may then be recovered by 7 Article 17 of the Decree-Law and Article 8 of the Executive Regulation. 7

There are a number of exceptions to the default place of supply rule for services: Where Then the supply takes place …services are supplied by a supplier who …in the recipient’s Implementing State. is resident in one GCC Implementing State to a recipient who is resident in another GCC Implementing State and the recipient is registered for VAT in the second Implementing State… …services are supplied by a supplier who …in the UAE. is resident outside the GCC Implementing States to a business recipient who is resident in the UAE… …services are supplied that relate to …where the services are performed. goods, such as the installation of goods… …there is supply of a means of transport …where the means of transport are to a lessee who is not a taxable person in placed at the disposal of the lessee. the UAE and is not registered for VAT in any GCC Implementing State… …there is a supply of restaurant, hotel, …where the services are performed. and catering services… …there is a supply of any cultural, artistic, …where the services are performed. sporting, educational or similar services… …there is a supply of services related to …where the real estate is located. real estate… …there is a supply of transportation …where the transportation starts. services… …there is a supply of telecommunications …where the use and enjoyment takes services or electronic services… place, to the extent of such use and enjoyment. 7.4. Reverse charge mechanism In certain situations a non-resident supplier of goods or services may be treated as making a supply in the UAE. As a consequence, the non-resident may be required to register for VAT and charge UAE VAT. The “reverse charge mechanism” is a simplification measure to avoid the need for nonresident suppliers who are resident outside the UAE to register for VAT when they make a supply of goods or services in the UAE to registered persons. Where the reverse charge mechanism applies, the non-resident supplier will not charge VAT to the recipient. Instead, the recipient must self-account for the VAT in respect of the goods and services received. This means that the recipient must record the VAT on the acquisition as output tax at the applicable rate in their system and 27 VAT Guide | Taxable Person | VATG001