First: Definition of Sole Proprietorship
A sole proprietorship is an entity wholly owned (100%) by a natural or legal person.
A sole proprietorship does not have a separate legal personality from its owner and is considered part of that person for VAT purposes.
Other entities, such as a single-member LLC, are not considered sole proprietorships as they are separate legal entities unless otherwise specified by law.
Second: Obligations Related to VAT Registration
A natural or legal person owning multiple sole proprietorships must register for VAT under a single name that covers all these entities.
Separate VAT registration for each sole proprietorship is not allowed, even if they engage in different business activities.
The VAT registration application can be submitted under the individual’s name or under one of the owned sole proprietorships, provided the application is submitted to the Federal Tax Authority following the proper procedures.
Third: Calculation of the Mandatory Registration Threshold
When calculating the mandatory VAT registration threshold of AED 375,000, the total value of taxable supplies made by the person and all their sole proprietorships must be combined as one group.
Supplies from all related entities must be aggregated to determine whether the registration threshold is exceeded.
Fourth: Correction and Procedures Related to Previous Registrations
In some cases, a person may have obtained separate VAT registrations for each sole proprietorship.
The Authority will review these registrations and may issue instructions for corrective actions.
For all future registration applications, the person must comply with the Authority’s position outlined in this general clarification.
Fifth: Reporting Undeclared Tax
If supplies of the sole proprietorship or person were omitted for assessment purposes and calculated independently without aggregation, a voluntary disclosure must be submitted to report any undeclared output tax.
If the registration threshold is exceeded without registration, the person must immediately notify the Authority and follow corrective procedures to account for the VAT due.
