A sole establishment, also known as sole proprietorship, is a business that is completely owned by a person. This means there are no partners or shareholders in that particular business, and the business has no legal identity free of its owner. There was a confusion among VAT registered persons whether they need to register each sole establishment separately or collectively under the name of a single person.
The FTA, in this respect, has issues a public clarification to outline the rules governing VAT registration of sole establishments in the UAE. The FTA also clarifies the conditions for making the owner of sole establishments liable for VAT registrations, and any corrective procedures that may need to be followed.
VAT Registration of Sole Establishments
As per the rules of FTA, a person can own several sole establishments. These establishments can be businesses of several types in different sectors or industries. However, the FTA orders a person to register all his or her sole establishments under a single VAT registration. This means that the person does not need to carry out registration of sole establishments separately.
There are, however, cases where the owner decides to register his or her sole establishment not by his name, but by the name of the establishment itself. In such cases, the person is required to apply to the FTA following its set rules for the purpose.
Reviewing Previous Sole Establishment VAT Registrations
Previously, the FTA had registered different sole establishments of the same owner separately. The FTA states that it shall review these actions and inform registrants of the steps they need to follow in order to correct this registration.
The public clarification highlights that each owner must aggregate the supplies of all of his sole establishments to see whether they qualify for VAT registration or not. In case an owner of sole establishments did not report any of his sole establishments because it was less than the VAT threshold, the FTA directs such a person to inform the FTA of this by submitting a voluntary disclosure.
In case a person does not register his sole establishment for VAT even though its supplies exceeded the threshold of AED 375,000, the person must inform the FTA so that the authorities can carry out corrective action in the case.
Implications of Sole Establishments Public Clarification
The FTA has set a minimum threshold for businesses to register for VAT. This clarification allows business owners to aggregate their businesses earnings to see whether they qualify for VAT or not.
There may be cases where a person has registered different sole establishments separately, and they do not amount to the minimum VAT requirement. However, the supplies value of all sole establishments may add up to the minimum required amount for VAT registration. In such a case, such a person shall be required to follow the procedure for registration of sole establishments under a single ownership. This act will prevent any tax evasion by establishing several small businesses by the same person.
Such a clarification also helps those who do not meet the threshold for VAT registration. Business owners may opt for optional registration, but unless their total supplies do not amount to AED 375,000, they are not obliged to register for the mandatory VAT. The same applies to registration of sole establishments.
About BS Auditing of Accounts
Although the FTA clarifications offer immense relief and guidance to people in general, and business owners in particular, the corrective measures and processes may be confusing for some. The best way to smoothly complete such processes, or simply to understand what they convey, is by seeking guidance of those who excel in understanding and interpretation of such legal matters.
BS Auditing of Accounts provides the best interpretation of all FTA laws, their amendments, and issued clarifications. The skilled and highly professional team members at BS Auditing are also there when you need assistance in resolving such matters.
Book your consultation today for best interpretation and guidance related to streamline abiding by FTA laws and VAT registrations. Feel free to contact us:
• Office # 0641, Tamani Arts Offices, Business Bay, P.O. Box 111390, Dubai, UAE
• +971 4 570 7357
• +971 58 108 5690
