Value-Added Tax (VAT) in the UAE

VAT is an indirect, consumption-based tax charged at a standard rate of 5% on most goods and services in the UAE. Registered businesses collect it on behalf of the Federal Tax Authority (FTA) and remit it periodically. This page sets out how the regime works, who must register, and the main compliance obligations.

Tax Mechanism

How VAT Works

5%

Standard rate charged on most goods and services in the UAE.

VAT applies to most goods and services supplied within the UAE, as well as imports, using a credit-invoice method. Registered businesses:

Charge output VAT on taxable supplies.
Recover input VAT incurred on business expenses.
Remit the net difference to the FTA each tax period.

The tax is ultimately borne by the end consumer, while businesses act as intermediaries in the collection chain.

Registration Thresholds

Registration obligations are determined by annual turnover, which includes all taxable supplies (standard-rated and zero-rated) and imports.

Registration Status	Turnover Threshold (AED)	Implication
Mandatory registration	Exceeds 375,000 in the past or expected next 12 months	Application required within 30 days of exceeding the threshold.
Voluntary registration	Exceeds 187,500 in the past or expected next 12 months	Optional; often used to enable input VAT recovery.
Exception from registration	Making exclusively zero-rated supplies	May apply to be excepted; a non-registered person does not file returns or recover input VAT.

Operational Workflow

Compliance Lifecycle

01 / Setup

Registration and Onboarding

• Apply through the FTA’s EmaraTax portal.
• Submit corporate documents (trade licence, certificate of incorporation, financial statements, bank details, and identification for the entity’s leadership).
• Receive a 15-digit Tax Registration Number (TRN), required on all official tax documentation.

02 / Execution

Operational Implementation

• Issue FTA-compliant tax invoices and credit/debit notes for taxable transactions.
• Maintain auditable records for a minimum of five years.
• Segregate income and expenses by VAT category: standard-rated (5%), zero-rated (0%), and exempt.

03 / Filing

Reporting and Settlement

• File VAT returns (typically quarterly) through EmaraTax within 28 days of the end of the tax period.
• Calculate net VAT liability (output VAT less recoverable input VAT).
• Settle any amount payable to the FTA by the filing deadline.

04 / Exit

Deregistration

• Required when taxable supplies cease, or when turnover stays below the voluntary threshold for 12 consecutive months.
• The final VAT return must account for assets held at the point of deregistration.

Structural Considerations

VAT group registration

eligible related parties, such as a parent and its subsidiaries, may form a single taxable person, removing VAT on intra-group transactions and filing one consolidated return.

Reverse charge mechanism

for specified supplies, such as certain imported services, the recipient accounts for the VAT instead of the supplier.

Partial exemption

a business making both taxable and exempt supplies must use a fair, FTA-approved method to apportion recoverable input VAT.

Penalties for Non-Compliance

The FTA applies administrative penalties for non-compliance. Examples include:

AED 10,000 for failure to submit a registration application on time.

AED 1,000 per month, capped at AED 10,000, for a delayed deregistration application.

AED 2,500 per instance for failure to issue a proper tax invoice.

AED 5,000 for failure to display prices inclusive of VAT.

Late payment penalties calculated as a percentage of the unpaid tax.

Penalty amounts are set by the FTA and are subject to change; current figures should be confirmed against FTA guidance.

Wider Implications

Beyond filing obligations, VAT affects cash flow management, pricing and margins, accounting systems (ERP configuration for correct VAT coding and invoicing), and how VAT treatment is defined in supplier and customer contracts.