What Happens If You Don’t Register for VAT in UAE

When Is VAT Registration Mandatory?

In the UAE, VAT registration is mandatory if:

• Your taxable turnover exceeds AED 375,000 in the past 12 months, or
• You expect to exceed the threshold in the next 30 days

This applies to all businesses and individuals carrying out taxable supplies, including:

• Companies
• Freelancers and consultants
• E-commerce sellers
• Service providers

Foreign businesses making taxable supplies in the UAE must register immediately regardless of threshold.

What Happens If You Don’t Register?

Failing to register for VAT when required is a serious violation under UAE tax law. The consequences include:

1. Administrative Penalties

• Late VAT registration: AED 10,000 fine
• Backdated VAT liability from the date you were required to register
• Late payment penalties on the unpaid tax:
  • 2% immediately after the due date
  • 4% after 7 days
  • 1% daily up to 300% of the tax due

2. Backdated VAT Liability

• The FTA can require you to pay VAT retroactively for all sales made since you should have been registered
• This is paid from your own pocket if you did not charge customers VAT

3. FTA Audit Risk

• Non-registration may trigger a tax audit
• Auditors will review bank statements, contracts, invoices, and customs records

4. Business Disruption

• Inability to work with VAT-registered clients (many companies only deal with VAT-compliant suppliers)
• Possible license issues if flagged for non-compliance

Example of Backdated VAT Liability

If you earned AED 1,000,000 in taxable turnover after you should have registered but didn’t:

• VAT due: AED 1,000,000 × 5% = AED 50,000
• Late payment penalties could raise the liability to AED 150,000+

Legal Implications

Non-registration is considered tax evasion if done intentionally. This can result in:

• Higher penalties
• Legal prosecution in extreme cases

How to Avoid Penalties

1. Track Your Turnover
   Monitor monthly sales to know when you approach AED 375,000
2. Register Early
   Don’t wait until the last minute; apply before reaching the threshold
3. Keep Documentation Ready
   Have trade license, bank letters, Emirates IDs, and invoices ready for FTA submission
4. Seek Expert Help
   A VAT consultant can ensure your registration is smooth and error-free

Most Searched VAT Registration FAQs (2026)

Q: Can I register for VAT after crossing the threshold?
A: Yes, but late registration penalties will apply.

Q: How does the FTA know I crossed the threshold?
A: Through audits, customs data, bank records, and client reports.

Q: If my revenue drops below the threshold after registration, can I cancel VAT?
A: Yes, you can apply for VAT deregistration if it remains below AED 187,500 for 12 months.

Q: Can I recover VAT for the period before registration?
A: In some cases, input VAT on pre-registration expenses can be recovered, subject to FTA rules.

Conclusion

Failing to register for VAT when required can cost your business heavily in penalties, backdated liabilities, and lost opportunities. Proactive compliance is the safest and most cost-effective approach.

Need Help With VAT Registration?

At Think Biz Management Consultancies, we help you:

• Determine your VAT eligibility
• Apply for VAT registration with the FTA
• Avoid late registration penalties
• Claim eligible pre-registration VAT
• Stay compliant with ongoing VAT obligations

Contact us today for a free consultation.
Let our VAT experts keep your business compliant and penalty-free.