VAT Registration of Sole Establishments in UAE
There was a dilemma with people in UAE whether each sole establishment, owned by a natural person, needs to obtain VAT registration separately or whether all such establishments could be included under one VAT registration. Recent changes released by the Federal Tax Authority (FTA) has clarifications regarding VAT registration of Sole Establishments in UAE.
A Sole Establishment refers to a sole proprietorship business form that is 100% owned by a natural person and does not have a legal personality that is distinct from its owner.
Clarification by FTA
A natural person owning a number of sole establishments needs to obtain only one VAT registration for all its sole establishments and does not require separate VAT registrations for such establishments.The sole establishments are not eligible to get registered separately.
This public clarification does not apply to a One-Person Company LLC or other similar legal entities, which are seen as distinct and separate legal persons from their owners (unless the applicable legislation treats such entity and the natural person as the same person).
For the avoidance of doubt, it should be noted that a legal person (e.g. a company) cannot own a sole establishment.
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.It is important to note that the taxable supplies by a natural person, as well as his sole establishment, must be considered collectively in order to determine the VAT registration obligations.If the aggregated value of supplies exceeded the mandatory threshold and failed to register for VAT purposes, then the natural person will be required to notify the FTA and corrective action must be taken to account for the outstanding VAT.
Consequently, if a registrant disregarded any of his sole establishments or his own taxable supplies for VAT purposes, the registrant is required to inform the FTA of any undeclared output tax by submitting a voluntary disclosure in accordance with Article 10(1) of the Federal Law No. 7 of 2017 on Tax Procedures.
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