May 26 2021

Tax Authority Extends VAT Registration Obligations for Sole Establishments

Source: IBFD Tax Research Platform News

The UAE Federal Tax Authority (FTA) has extended the VAT registration of sole establishments to legal persons. The FTA confirmed that a legal or natural person owning a number of sole establishments needs to obtain only one VAT registration for all its sole establishments and that the FTA does not require separate VAT registrations for such establishments.

The VAT registration should be obtained ideally in the name of the natural person owning the sole establishments. However, if a natural person, owning multiple sole establishments, wishes to obtain the VAT registration in the name of one of its sole establishments, the person may apply to the FTA accordingly. The value of supplies made by the natural person and all its sole establishments must be aggregated to assess whether the VAT registration threshold has been exceeded.

The FTA further provides that it will review such VAT registrations in certain cases and inform the relevant taxable persons of the corrective steps they should take, if any.

It should be noted that, for VAT purposes, a one-person company LLC or other similar entities are not considered sole establishments, and are seen as a distinct and separate legal person from their owner unless the relevant applicable legislation states otherwise.

The FTA published the extension on VAT registration of 'Sole Establishments" in public clarification No. VATP026 on 5 May 2021. The public clarification No.VATP026 replaces the clarification No. VATP021 which limited the VAT registration to sole establishments owned by a natural person.