The Ultimate Guide to VAT in the UAE

Value Added Tax (VAT) was introduced in the United Arab Emirates (UAE) on 1 January 2018 as part of the GCC VAT framework. The current standard VAT rate is 5% and applies to most goods and services supplied within the UAE.

This guide explains everything you need to know about VAT in the UAE — from when registration is required to how to file returns, what’s exempt, and how to stay compliant with the Federal Tax Authority (FTA).

What is VAT?

VAT is a consumption tax applied at each stage of the supply chain where value is added, from production to the final sale.  Businesses collect VAT on behalf of the FTA and can reclaim VAT paid on business-related expenses (input tax).

Example:
A supplier sells machinery to a retailer for AED 10,000 + AED 500 VAT (5%), totaling AED 10,500. The supplier collects the AED 500 VAT from the retailer and must remit it to the FTA. However, if the supplier paid AED 200 VAT on parts purchased to produce the machinery (input VAT), they only remit the net VAT of AED 300 (AED 500 output VAT − AED 200 input VAT) to the FTA.

When Is VAT Registration Required?

Mandatory Registration

You must register for VAT if your taxable turnover exceeds AED 375,000 in the previous 12 months or is expected to exceed this amount in the next 30 days.

Voluntary Registration

You may register voluntarily if your taxable turnover or expenses exceed AED 187,500 in the previous 12 months. This is often beneficial for startups and small businesses that want to reclaim input VAT.

Non-Resident Registration

Non-resident businesses making taxable supplies in the UAE must register for VAT regardless of turnover — unless a UAE-based recipient accounts for VAT under the reverse charge mechanism.

Who Needs to Register for VAT?

VAT registration applies to:

• UAE-established businesses exceeding the threshold
• Freelancers or sole traders supplying taxable goods/services
• Non-resident entities supplying taxable goods/services to UAE customers
• Businesses importing goods into the UAE
• Corporate groups that meet FTA conditions for tax group registration

How to Register for VAT

You can register online through the FTA e-Services Portal

Steps:

1. Create an eServices account on the FTA website.
2. Complete the VAT registration form with business details.
3. Upload required documents (trade licence, Emirates ID, passport copies, proof of address, financial statements).
4. Submit for review.
5. Once approved, you’ll receive a Tax Registration Number (TRN).

Responsibilities After Registration

Once registered, you must:

• Charge 5% VAT on all taxable supplies
• Issue tax invoices that meet FTA requirements
• Maintain accounting records and VAT reports for at least 5 years
• File VAT returns quarterly (or monthly for high-volume businesses)
• Pay VAT owed to the FTA by the due date

 

Filing VAT Returns and Paying VAT

VAT returns are submitted electronically through the FTA portal.

Most businesses file quarterly, with the due date being 28 days after the end of the tax period.

Your VAT return should include:

• Output VAT (VAT collected on sales)
• Input VAT (VAT paid on purchases)
• Net VAT due (or refund claim)

Payment can be made via eDirham, bank transfer, or other FTA-approved methods.

VAT Exemptions and Zero-Rated Supplies

Some goods and services are zero-rated (0%) or exempt from VAT.

Category	Treatment	Example
Exports outside GCC	0%	Exports to non-GCC countries
International transport	0%	Flights, shipping
Education	0% or Exempt	Depending on institution
Healthcare	0% or Exempt	Approved medical services
Residential property (first supply)	0%	New Buildings
Bare land	Exempt	Land without development

Claiming Input VAT

Registered businesses can reclaim input VAT paid on eligible business expenses.

You cannot claim input VAT on:

• Entertainment or personal expenses
• Motor vehicles used for personal use
• Non-business purchases

To claim input VAT, keep proper invoices and ensure the supplier’s TRN is valid.

Deregistration

Businesses may deregister from VAT if:

• Their taxable turnover falls below AED 187,500, or
• They cease making taxable supplies.

Applications must be submitted via the FTA portal, and all outstanding VAT returns must be filed and paid before deregistration is approved.

Penalties for Non-Compliance

FTA imposes strict fines for late registration, late filing, or incorrect recordkeeping.

Offence	Penalty
Late VAT registration	AED 10,000
Failure to file VAT return on time	AED 1,000 9first time), AED 2,000 (repeated)
Late payment of VAT	2% immediately, 4% monthly (max 300%)
Incorrect return or data	AED 5,000 per error

VAT in the UAE at a Glance

• VAT applies at 5% on most supplies in the UAE.
• Registration is mandatory once turnover exceeds AED 375,000.
• File returns quarterly and maintain accurate records.
• Certain sectors enjoy zero-rated or exempt treatment.
• Staying compliant avoids heavy penalties and builds business credibility.

Need Help?

Managing VAT can be complex — from registration to filing and compliance. Our experts can handle everything on your behalf so you can focus on running your business.