What is UAE VAT?
UAE VAT is a 5% federal tax on most goods and services, introduced 1 January 2018. Mandatory registration at AED 375,000 annual turnover; voluntary at AED 187,500. Standard rate 5%; some supplies are zero-rated (exports, healthcare, education) or exempt (residential rent, financial services, local passenger transport).
Current Rate (Quarterly returns (some businesses monthly), due 28 days after period end)
5% standard, 0% zero-rated, exempt for certain supplies
Example
A consultancy invoicing AED 100,000 net charges AED 105,000 (5% VAT). If it spent AED 21,000 on VAT-bearing inputs (AED 1,000 input VAT), it remits AED 4,000 to the FTA.
How UAE VAT works in United Arab Emirates
UAE VAT was introduced on 1 January 2018 as part of the GCC-wide VAT framework. At 5%, it is one of the lowest standard VAT rates globally — designed to generate federal revenue while remaining attractive to business.
**Registration thresholds**
- Mandatory registration: AED 375,000 annual taxable turnover in the past 12 months or anticipated in the next 30 days - Voluntary registration: AED 187,500 — useful if you have significant input VAT to recover - Register via the FTA's EmaraTax portal (tax.gov.ae). FTA issues a Tax Registration Number (TRN) and VAT effective date.
**VAT rates**
- 5% standard rate: applies to most goods and services - 0% zero-rated: exports, international transport, first sale of residential real estate, certain healthcare, certain education, gold/investment precious metals - Exempt: local passenger transport, financial services (most), residential property rental, bare land, life insurance
Zero-rated is different from exempt: on zero-rated supplies you still charge 0% VAT but can recover input VAT on your costs. On exempt supplies, you charge no VAT and cannot recover related input VAT.
**Filing VAT returns (Form VAT201)**
Most businesses file quarterly returns, due 28 days after the period end. Large businesses may be required to file monthly. The return is filed and paid electronically via EmaraTax. You report output VAT charged on sales and input VAT on purchases — the difference is paid to or refunded from the FTA.
**Tax invoice requirements**
A full Tax Invoice (required for supplies above AED 10,000) must include: supplier name and TRN, customer name and TRN (if registered), date, description of goods/services, unit price, quantity, net amount, 5% VAT amount, and gross total. Simplified invoices are allowed below AED 10,000.
**Reverse charge mechanism**
Imported services from non-UAE suppliers are subject to reverse charge VAT: the UAE recipient accounts for both output and input VAT on the same return. Examples: subscriptions to foreign SaaS tools, digital services from overseas.
Related terms
The Tax Registration Number is the 15-digit identifier issued by the FTA to every VAT-registered business and Corporate Tax-registered entity. It must appear on tax invoices and FTA correspondence.
UAE Corporate Tax is the federal tax on business profits introduced by Federal Decree-Law No. 47 of 2022, effective 1 June 2023. It applies a 0% rate on the first AED 375,000 of taxable income and 9% above. Qualifying Free Zone Persons can pay 0% on Qualifying Income. Multinational groups within Pillar Two scope face a 15% Domestic Minimum Top-up Tax from 1 January 2025.
UAE Free Zones are special economic zones offering 100% foreign ownership, customs benefits, and (subject to QFZP rules) preferential 0% Corporate Tax on Qualifying Income. There are 40+ Free Zones across the seven emirates, each with their own Authority and licensing rules.
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