Over the past several years, the United Arab Emirates (UAE) tax environment has experienced significant changes. Since the value added tax (VAT) was implemented in 2018, companies doing business in the UAE must obtain a tax registration number (TRN), also known as a tax identification number, which is a unique identity issued by the Federal Tax Authority (FTA) for tax tracking.
What is a tax identification number (TRN)?
Companies and individuals signed up to pay taxes in the UAE are identified by their TRN, a unique number of 15 digits. This is issued by the country’s FTA. The FTA uses this number as a vital instrument to monitor and distinguish among taxpayers and ensure that the UAE’s tax laws are followed. All transactions, files, and communications about taxes, including VAT return filings and tax invoices, use the TRN. A tax credit note is also part of the necessary financial compliance documentation. Businesses with more taxable supply than the registration threshold are required to get a TRN, which they must include on all tax invoices and financial records. Corporations must register using the FTA’s web portal and apply for a TRN, which requires them to provide comprehensive information and related documentation.
The TRN is an essential part of the country’s tax system since it makes tax compliance easier and enables companies to charge VAT to their clients. You will be officially registered for VAT after your registration application is accepted. A registration certificate, a Generated International Bank Account Number (GIBAN), and a VAT TRN are among the important documents you will get. You can quickly obtain the registration certificate from your EmaraTax account. These records confirm your official VAT registration status and ensure you adhere to UAE tax laws.
Importance of TRN in the UAE
The UAE’s economic situation has changed significantly since the implementation of the TRN. Here are some reasons why UAE-based firms should be aware of the TRN:
Legal Compliance
All legally required documents, official papers, invoices, and communications pertaining to taxable transactions must have the VAT-registered firm’s TRN. The FTA can impose fines and penalties for failure to furnish a valid TRN.
Tax recovery input
Only businesses with a valid TRN can claim input tax credits on purchases. Verifying the TRN of such providers can help a company ensure that it is working with reputable suppliers and that it can collect input tax in accordance with VAT legislation.
Additionally, understanding the importance of excise tax is crucial for comprehensive tax compliance, as it not only helps reduce the consumption of harmful goods but also ensures proper registration and reporting, similar to VAT requirements.
Accountability and transparency in business
The TRN promotes transparency in commercial dealings and helps prevent fraud and tax evasion. By verifying TRNs, companies can be sure they are working with reputable and law-abiding organizations.
Company image
In commercial negotiations, displaying a valid TRN contributes to credibility and trust development. Businesses with a valid TRN and VAT registration are likelier to have good relationships with clients and partners.
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Eligibility to get TRN in UAE
In the UAE, all businesses operating must abide by government rules about VAT and other matters. A corporation must also meet the following income requirement to be qualified for VAT registration and a TRN in the UAE:
Voluntary registration: AED187,500 is the minimum TRN and VAT registration threshold. Additionally, a corporation can register for VAT if its sales are more than AED187,000 but less than AED375,000. Furthermore, a company is exempt from VAT registration if its annual income is less than AED187,500.
Mandatory registration: The mandatory threshold for TRN registration is approximately AED375,000. Moreover, to avoid paying significant fines and penalties, the firm must register for VAT if its income is projected to exceed it in the upcoming month or during the previous 12 months.
Tax registration process in UAE
The tax registration process in the UAE is designed to be straightforward and user-friendly, thanks to the FTA’s (FTA) EmaraTax portal. Here’s a step-by-step guide to help you navigate the process:
- Create an account: Use your UAE Pass to create an account on the EmaraTax portal, which will give you access to the online VAT registration system.
- Fill out the registration form: Complete the VAT registration form by providing detailed information about your business, including your trade license, business activities, and financial transactions.
- Upload required documents: Ensure you have all the documents ready to upload. These typically include your trade license, certificate of incorporation, and bank account details.
- Submit the application: Once you have completed the form and uploaded the required documents, submit your application for VAT registration. The FTA will then review your submission.
- Receive your TRN: After your application is approved, you will receive your TRN and a registration certificate. These documents confirm your official VAT registration status and ensure compliance with UAE tax laws.
By following these steps, businesses can efficiently complete their tax registration, ensuring they meet all legal requirements and operate smoothly within the UAE’s tax framework.
Corporate tax in UAE
Corporate tax in the UAE is a federal tax levied on the profits of businesses operating within the country. The corporate tax rate is set at 9 percent on business income, making it crucial for companies to understand their tax obligations. Here are some key points to consider:
- Who is eligible: Corporate tax applies to all businesses operating in the UAE, including free zone companies and branches of foreign companies. This ensures a broad tax base and fair competition.
- Taxable income: A tax is imposed on businesses’ taxable income, which includes profits from business activities, rental income, and capital gains. Understanding what constitutes taxable income is essential for accurate tax reporting.
- Tax exemptions: Certain businesses and industries enjoy exemptions from corporate tax. For instance, oil and gas companies and businesses operating in designated free zones may be exempt, providing significant tax relief.
- Tax compliance: Compliance with corporate tax regulations is mandatory. Businesses must file tax returns and pay taxes on time to avoid legal issues and maintain good standing with the FTA.
- Penalties for non-compliance: Failure to comply with corporate tax regulations can result in severe penalties and fines. Adhering to all tax laws is crucial for businesses to avoid financial and legal repercussions.
Understanding and complying with corporate tax regulations is vital for businesses operating in the UAE. By staying informed and meeting their tax obligations, companies can ensure smooth operations and avoid potential penalties.
How to verify TRN in UAE
The official FTA portal offers a complete online process for verifying a TRN in the UAE. The following is a step-by-step process for validating a TRN:
Step 1. Go to the FTA portal
Go to the Federal Tax Authority’s official website. Then, choose the ‘TRN’Â icon from the panel on the right.
Step 2: Enter the TRN
You will be asked to enter the 15-digit TRN you want to be verified. Ensure you enter the TRN correctly to prevent mistakes during the verification process.
Step 3: Submit the request for verification
After entering the TRN, click ‘Verify’ or ‘Submit’ to start the verification process. The system will compare the TRN to the FTA database to verify its credibility.
Documents required to get TRN in UAE
You must provide the relevant agency with the required documentation to obtain a TRN number for your company in the UAE. The list of documents that you could be required to provide is below:
- Company’s MoA
- Company’s trade license
- Import or export declarations
- Company bank account details
- Company’s turnover declaration letter
- Company’s contact details and address
- Emirates IDs of the shareholder/manager
- Passport copies of the shareholder/manager
- Last year’s income statement and bank details
- Sample invoices from the suppliers and customers
Why is it necessary to verify TRN in the UAE
Verifying TRN has several benefits. Below are some of the points that can be taken into consideration, as it helps you to ensure the following things:
- Whether the seller is using a valid TRN in the invoice
- Whether VAT is charged using a valid TRN
- Accurate input tax credit (ITC) claims
- Avoid VAT-related frauds
How long does it take to process TRN in UAE
Once your application is accepted, it normally takes 20 business days to get the TRN certificate in the UAE. Nonetheless, the FTA can require additional time to fully complete the application in certain situations when more information is required for tax registration in the UAE.
Role of tax agents in TRN verification and registration
In the UAE, relevant tax agencies are essential in registering and verifying TRNs. They offer professional advice and support to companies navigating tax compliance challenges. These organizations make sure that all required paperwork, including trade licenses, memorandums of association, and financial accounts, are meticulously prepared and filed via the FTA’s EmaraTax system during TRN registration. Additionally, they support the TRN number verification procedure, ensuring precision and compliance with FTA regulations. The assistance provided by these agencies goes beyond simple paperwork. They also offer continuous help to ensure that companies maintain tax compliance, avoid fines, and optimize their tax strategy in accordance with UAE legislation.
Conclusion
In conclusion, verifying a TRN in the UAE is a simple and quick procedure that protects companies from fraud and guarantees adherence to VAT laws. For seamless transactions, the FTA offers a free online application that can verify a business’s validity and keep proper tax records. This is useful for companies, as they can carry out their business activities without any hassle and maintain transparency.
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