UAE's FTA clarifies tax rules for owners of multiple establishments

Authority clarifies whether entrepreneurs should get a registration for every 'sole business'

Image used for illustrative purpose. Businesswoman using a calculator at her desk in a modern office

Image used for illustrative purpose. Businesswoman using a calculator at her desk in a modern office

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Sole owners of multiple establishments in the UAE are required to obtain a single tax registration, rather than apply for one registration for every establishment, the Federal Tax Authority (FTA) clarified on Tuesday.

“A natural person owning a number of sole establishments may only obtain one tax registration for all its sole establishments, and not a registration for each establishment separately,” the authority said in a statement.

The clarification was issued for the purpose of implementing the value-added tax (VAT). Businesses in the UAE should register for VAT if their taxable products are worth more than 375,000 dirhams ($102,000) per year.

The FTA defines a sole establishment, also referred to as sole proprietorship, as a “legal form of business which is 100 percent owned by a natural person”.

A sole establishment, the FTA added, does not have a legal personality independent of its owner, as the sole establishment and its owner are considered to be the same person.

However, the FTA pointed out that the rule does not apply to businesses that fall under the “one-person company LLC” category or other similar legal entities which are seen as distinct and separate legal persons from their owners.

“In certain cases, tax registrations by taxpayers are reviewed with regards to sole establishments and such persons will be informed of the corrective measures to be taken, if needed,” the FTA continued.

“The taxable supplies made by a natural person, in addition to his sole establishment(s), must be considered collectively in order to determine whether the person exceeded the mandatory VAT registration threshold of 375,000 dirhams,” it added.

(Writing by Cleofe Maceda; editing by Seban Scaria)

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