Recently, the Federal Tax Authority (‘FTA’)has published its new public clarification regarding the VAT registration of «Sole Establishment».
According to the Clarification, a sole establishment (also referred to as sole proprietorship or المؤسسة الفردية ) is a legal form of business which is 100% owned by a natural person. A sole establishment does not have a legal personality that is independent of its owner and is accordingly considered to be the same person as its owner.
The FTA notes that a legal person (e.g a company) cannot own a sole establishment.
The Clarification (VATP021) states that the a natural person owning a number of sole establishments needs to obtain only one VAT registration for all its sole establishments and does not require separate VAT registrations for such establishments.
The FTA will review, in certain cases, the VAT registrations by taxable persons in respect of sole establishments and will inform them of the corrective steps to be taken, if any.
It is important to note that the taxable supplies by a natural person, as well as his sole establishment, must be considered collectively in order to determine the VAT registration obligations. If a registrant disregarded any of his sole establishments or his own taxable supplies for VAT purposes (for example, on the basis that the sole establishment or his taxable supplies did not reach the VAT registration threshold on a stand-alone basis), the registrant is required to inform the FTA of any undeclared output tax by submitting a voluntary disclosure if required.
For any VAT registrations received in the past, no action is required to amend the VAT registrations until specifically directed by the FTA.