INTRODUCTION

On January 1, 2018, the introduction of VAT brought in a new era of economic change in the taxation system in the UAE. Since then, the companies that are operating in the GCC (Gulf Cooperation Council) are subject to VAT provisions. With the establishment of VAT, the Federal Tax Authority (FTA) has generated the Tax Registration Number (TRN) as an important measure for any business activity being operated in the UAE. 

The Federal Tax Authority (FTA) has stated that businesses in the UAE don’t need to present a tax certificate for their commercial activities. Instead, they can use their Tax Registration Number (TRN) for VAT-related matters which makes the TRN registration significant for business owners.

This is a positive step toward the international tax compliance law where certain companies that reach a specific threshold must be registered under the Value Added Tax (VAT) system which proves to be an income-generating source for different kinds of business transactions. 

WHAT IS VAT?

Value Added Tax (VAT) is a form of indirect tax where a specific value can be added to the product at any stage. In the UAE, the rate for VAT is 5% which can be imposed on different forms of businesses. It is beneficial for registered businesses, as it allows them to get back the amount from their transactions or purchases through VAT Returns. This allows them to collect taxes from the consumer which in turn can contribute to the betterment of the economy on a large scale. 

WHAT IS TRN? 

The Tax Registration Number (TRN) is a 15-digit number issued by the FTA that is used as a distinguishing tool for companies. The number helps segregate or differentiate one company from another.  It is part of the unique identification system that is used for tax invoices, VAT returns, tax credits, and other financial matters.  Businesses that are part of VAT, receive a TRN together with the TRN certificate which permits the companies to charge their customers VAT. 

At times, TRN is also called the VAT registration number which every company receives when they are registered for VAT. Non-compliance or failure to do so can lead to fines and penalties. 

WHAT IS THE ROLE OF TRN? 

TRN plays a very important role in processing several tax-related documents that allow different companies to function in the country and avail of various tax benefits. Any company registered for tax purposes in the UAE, particularly for VAT must own a Tax Registration Number and a certificate. Through TRN, the tax authority can verify businesses and track all their purchases. They can also see the tax status of the company which ensures compliance with the new law. 

WHAT IS THE IMPORTANCE OF TRN?

TRN Verification is a time-efficient, money-saving, and productive method for both the public and private sectors. It can help with: 

• Claiming back paid taxes that are charged on the purchase, manufacture, and processing of a product or merchandise.
• Providing a refund for companies who have registered under VAT and have acquired a valid TRN.
• Recovery of business purchases by the buyer through VAT.
• Paying for utilities like electricity and water for commercial use.

According to the VAT Law of the UAE, TRN Verification of all tax documents is necessary for companies, and these are:

• Tax Invoice
• VAT Return
• Tax Credit Note/Record
• Other relevant documents 

WHAT ARE THE BENEFITS OF TRN?

 TRN Verification is a compliance measure created under the UAE VAT Laws. When a company completes the TRN Verification process, numerous benefits are provided which are listed below: 

• It tracks all the transactions made by numerous buyers and establishments
• It provides a unique identity for businesses
• It offers easy communication with the FTA
• It legalizes the business on the tax invoice
• It organizes the collection of documents related to taxes
• It highlights the compliance aspects of the company
• It creates investor and shareholder confidence
• It mitigates any risk of non-compliance to avoid penalties
• It simplifies communication between the buyer and seller
• It showcases an organized process of transactions for businesses

WHO NEEDS TO REGISTER FOR TRN?

For a company to be eligible for VAT Registration and TRN Verification, they need to fulfill certain revenue requirements listed below: 

Mandatory Registration

• The mandatory threshold for registration is AED 375,000.
• If the company’s revenue exceeds in the past 12 months or is expected to exceed in the coming 30 days, then it must mandatorily register for VAT to avoid penalties and fines.
• This threshold does not apply to foreign businesses.

Voluntary Registration

• The voluntary threshold for registration is AED 187,500.
• If the company’s revenue is greater than AED 187,500 but less than AED 375,000 then the company can choose to register for VAT.
• If the company’s revenue is lower than AED 187,500 then it does not need to register for VAT.

 WHAT IS THE PROCEDURE?

An assessment of TRN eligibility is needed to evaluate if the business needs to go through the procedure. Those who are due for VAT registration can hire tax agents who can guide or help them in the completion of the process. 

The agent can register on behalf of the tax applicant and apply with the relevant authority within 30 days of registration. The steps needed to acquire TRN in the UAE are: 

• Login into the e-services online portal of the FTA for registration
• Click on the button to receive the complete information
• Complete the VAT registration form
• Fill all the sections with the required details
• Submit the information for approval 

WHAT IS THE PURPOSE? 

Once registration is done successfully, the company will receive a TRN certificate issued by the FTA. Based on that, the company will process its VAT filing before the mentioned due date. Businesses with a valid TRN can use the certificate for: 

• Change of ownership
• Business closing
• Below voluntary threshold
• Below mandatory threshold 

WHAT DOCUMENTS ARE REQUIRED? 

To ensure that the documents comply with the rules and regulations, the company can hire tax agents that can review, organize, and submit the following documents:  

• Company’s trade license
• Company’s address and contact details
• Company Bank Account Details
• Company’s Memorandum of Association
• Last Year’s bank details and income statement
• Company’s turnover declaration letter
• Passport copies of the manager/shareholder on license
• Emirates IDs of the manager/shareholder on the license
• Valid Residence Visa copy of the manager/shareholder on license
• Custom registration
• Sample invoices from the suppliers and customers
• Import or export declarations

WHAT IS THE PENALTY FOR NON-COMPLIANCE? 

Any company with late registration will receive a fine of AED 20,000. Other penalties will also be added by the FTA depending on the date on which the threshold exceeds.

If incorrect information is provided or if there is an error in the registration process, then the completed form will be dismissed. The company will have to go through the whole procedure all over again which prolongs the registration process. 

HOW TO CHECK FOR TRN AUTHENTICITY? 

One of the vital requirements for companies to register for VAT is to allow them to file and collect taxes. TRN verification ensures that the businesses that are charging clients with VAT have a valid TRN. 

If the client pays VAT without TRN verification, then the VAT return will not be available to them as an input tax credit. To avoid the loss of tax and to check the authenticity of the company claiming to be VAT registered, an FTA check can be performed not only by businesses but by individuals as well.

The steps for TRN Verification are as follows:

1. Visit https://eservices.tax.gov.ae/en-us/trn-verify
2. Enter the TRN of the business in the space provided
3. Enter the Security Code as displayed on the screen
4. Press the ‘Validate’ button
5. If the number is authentic then the legal name of the company will appear in English and Arabic.

HOW ACCOUNTABILITY CAN SUPPORT YOU? 

To avoid any penalties, you can hire a trusted consultancy that can provide you with start-to-end solutions from assessment to procurement for TRN registration. 

For a better understanding of the TRN requirements, AccountAbility can help your company navigate through the extensive guidelines of the new tax law in the UAE. With our support, you can incorporate the right tax structure in your company that can save you time, mitigate the risks, and protects your assets.

Our team is ready to help you with the VAT and TRN registration and de-registration process. Book a free consultation with us and get to know more about our various services. Call us at +971 50 279 8784⁠ or email us at info@accountability.ae. We are looking forward to hearing from you.