Your Trusted Legal and Advisory Partner.
Sign In

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.

How VAT Works

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

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 StatusTurnover Threshold (AED)Implication
Mandatory registrationExceeds 375,000 in the past or expected next 12 monthsApplication required within 30 days of exceeding the threshold.
Voluntary registrationExceeds 187,500 in the past or expected next 12 monthsOptional; often used to enable input VAT recovery.
Exception from registrationMaking exclusively zero rated suppliesMay apply to be excepted; a non registered person does not file returns or recover input VAT.

Compliance Lifecycle

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.
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.
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.
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.

The standard VAT rate in the UAE is 5%, in force since 1 January 2018 under Federal Decree Law No. 8 of 2017 and its amendments. Certain supplies are zero rated and others are exempt, which changes both the VAT charged and the input tax you can recover.

Registration is mandatory once taxable supplies and imports exceed AED 375,000 in the previous 12 months, or where they are expected to exceed it in the next 30 days. Voluntary registration is available from AED 187,500, which can suit start ups with recoverable input VAT.

Under the reverse charge, the UAE recipient accounts for the VAT instead of the supplier. It applies to imports of goods and services from outside the UAE and to certain domestic supplies between registered businesses. You report both output and input VAT in the same return, which is often net neutral but must still be disclosed correctly.

Zero rated supplies are taxable at 0% and still allow recovery of related input VAT, covering items such as exports of goods and services and qualifying healthcare and education. Exempt supplies carry no VAT and block input recovery, covering areas such as bare land, local passenger transport and certain financial services.

Penalties include AED 10,000 for failure to register on time, fixed penalties for late returns that increase on repetition, monthly percentage penalties on unpaid tax, and substantial penalties for incorrect returns and poor record keeping. Voluntary disclosure before an FTA audit generally reduces exposure.

Exported services can be zero rated, but only where the conditions are met, broadly that the recipient has no place of residence in the UAE and is outside the country when the service is performed, and the service does not relate to goods or real estate situated here. Getting these conditions wrong is one of the most common causes of FTA assessments.

Yes, on the same thresholds as any other business. Only companies established in a Designated Zone receive special treatment, and even then it applies to specific goods transactions rather than exempting the company from VAT registration or filing.

VAT records must generally be retained for five years, extended to fifteen years for records relating to real estate. Corporate tax rules require record retention for seven years after the end of the relevant tax period, so align your archive to the longest applicable period.

VAT is a 5 percent consumption tax collected at each stage of the supply chain, with registered businesses charging output VAT on sales and recovering input VAT on eligible expenses before remitting the net amount to the Federal Tax Authority.

Yes, voluntary registration is available once turnover or taxable expenses exceed AED 187,500, which can be useful for recovering input VAT during the start up phase.

The TRN is the unique 15 digit number the FTA issues on approval of a VAT registration, and it must appear on tax invoices and returns.

Applications are prepared and submitted through the FTA's EmaraTax portal along with supporting corporate and financial documents.

Related legal entities under common control can apply to be treated as a single taxable person for VAT purposes, simplifying compliance across the group.

Businesses that make both taxable and exempt supplies must apportion their input VAT using an FTA approved method, recovering only the portion attributable to taxable activity.

Most businesses file quarterly, though the FTA can assign a monthly filing period, with returns and payment due within 28 days of the period end.
Talk To Our Experts Now

Need expert help? Contact our agents today.

Strategic Partners

Business Setup In Dubai MainlandRak Icc Offshore Company FormationBusiness Setup In DmccBusiness Setup In JafzaBusiness Setup In DifcBusiness Setup In DafzaBusiness Setup In Dubai Silicon OasisBusiness Setup In Dubai Internet CityBusiness Setup In Dubai Media CityBusiness Setup In Dubai Knowledge ParkBusiness Setup In Dubai Healthcare CityBusiness Setup In Dubai Design DistrictBusiness Setup In Dubai SouthBusiness Setup In Dubai CommercityBusiness Setup In Dubai Studio CityBusiness Setup In Dubai Production CityBusiness Setup In Dubai Science ParkBusiness Setup In Dubai Industrial CityBusiness Setup In Dubai Outsource CityBusiness Setup In Meydan Free Zone Business Setup In Dubai MainlandRak Icc Offshore Company FormationBusiness Setup In DmccBusiness Setup In JafzaBusiness Setup In DifcBusiness Setup In DafzaBusiness Setup In Dubai Silicon OasisBusiness Setup In Dubai Internet CityBusiness Setup In Dubai Media CityBusiness Setup In Dubai Knowledge ParkBusiness Setup In Dubai Healthcare CityBusiness Setup In Dubai Design DistrictBusiness Setup In Dubai SouthBusiness Setup In Dubai CommercityBusiness Setup In Dubai Studio CityBusiness Setup In Dubai Production CityBusiness Setup In Dubai Science ParkBusiness Setup In Dubai Industrial CityBusiness Setup In Dubai Outsource CityBusiness Setup In Meydan Free Zone
Business Setup In AdgmBusiness Setup In KizadBusiness Setup In Masdar City Free ZoneBusiness Setup In Twofour54Business Setup In Abu Dhabi Airport Free ZoneBusiness Setup In Saif ZoneBusiness Setup In Hamriyah Free ZoneBusiness Setup In Spc Free ZoneBusiness Setup In ShamsBusiness Setup In SrtipBusiness Setup In Sharjah Healthcare CityBusiness Setup In RakezBusiness Setup In Rak Maritime CityBusiness Setup In Ajman Free ZoneBusiness Setup In Ajman Media CityBusiness Setup In IfzaBusiness Setup In Fujairah Free ZoneBusiness Setup In Fujairah Creative CityBusiness Setup In Fujairah Oil Industry ZoneBusiness Setup In Uaq Free Trade Zone Business Setup In AdgmBusiness Setup In KizadBusiness Setup In Masdar City Free ZoneBusiness Setup In Twofour54Business Setup In Abu Dhabi Airport Free ZoneBusiness Setup In Saif ZoneBusiness Setup In Hamriyah Free ZoneBusiness Setup In Spc Free ZoneBusiness Setup In ShamsBusiness Setup In SrtipBusiness Setup In Sharjah Healthcare CityBusiness Setup In RakezBusiness Setup In Rak Maritime CityBusiness Setup In Ajman Free ZoneBusiness Setup In Ajman Media CityBusiness Setup In IfzaBusiness Setup In Fujairah Free ZoneBusiness Setup In Fujairah Creative CityBusiness Setup In Fujairah Oil Industry ZoneBusiness Setup In Uaq Free Trade Zone

Insights On Tax & Audit

blog image

Sep 05, 2026

FTA Decision No. 7 of 2026: What Happens to Seized and Abandoned Goods in the UAE

FTA Decision No. 7 of 2026 lets the Federal Tax Authority auction seized or abandoned perishable goods, with proceeds covering costs, tax and penalties before any balance returns to the owner.

Read More

Jul 22, 2026

UAE Pillar Two Registration Is Now Open : What Multinational Groups Must Do Next

The UAE FTA has opened Pillar Two Top up Tax registration on EmaraTax for qualifying multinational groups. Learn who needs to register, the 15% minimum tax rule, key deadlines, ETR requirements, and how to prepare for UAE Pillar Two compliance.

Read More
blog image

Jul 13, 2026

OECD Proposes Revisions to Transfer Pricing Guidelines for Intra Group Services

The OECD has proposed key revisions to Chapter VII of the Transfer Pricing Guidelines, tightening how intra group services must be delineated, priced, and documented. Here's what the changes mean for multinational groups and how to prepare before the final guidance takes effect

Read More

Ready to establish your legacy?

Join over 500+ entrepreneurs who chose Legacy Partners.

Book Free Consultation