VAT has applied in the UAE since 1 January 2018, under Federal Decree-Law No. 8 of 2017. The standard rate is 5%, and most businesses that buy and sell in the UAE are caught by it. Here is what registration, filing and recovery actually involve.
When you must register — AED 375,000 and AED 187,500
Registration is mandatory once your taxable supplies and imports exceed AED 375,000 over the previous 12 months, or you expect to cross it in the next 30 days. You may register voluntarily from AED 187,500 of supplies or taxable expenses — often worth it for start-ups that want to recover input VAT on set-up costs. Missing the mandatory deadline carries an AED 10,000 late-registration penalty.
Filing — EmaraTax and the 28-day rule
VAT returns are filed online through the FTA’s EmaraTax portal. Most businesses file quarterly; larger ones are assigned monthly periods. Whatever your cycle, the return must be filed and the net VAT paid by the 28th day of the month following the end of the tax period. You charge output VAT on your sales, recover input VAT on valid business expenses, and pay (or reclaim) the difference.
“Zero-rated and exempt look the same on a customer’s invoice. They are opposites on your VAT return.”
Zero-rated vs exempt — the costliest confusion
This is where we re-paper the most positions. Zero-rated supplies are taxable at 0% — and crucially you can still recover the input VAT attributable to them. Examples include exports outside the GCC, international transport, and certain healthcare and education. Exempt supplies carry no VAT but block input-VAT recovery — examples include certain financial services, bare land, local passenger transport and residential leases. Misclassifying one as the other either overstates your reclaim or silently loses recoverable VAT.
Imports, designated zones and corrections
VAT on imported goods and services is generally accounted for under the reverse-charge mechanism — you self-account for it on your return rather than paying it at the border. Designated zones have their own treatment for goods. And if you find an error in a filed return, you correct it through a voluntary disclosure rather than quietly adjusting the next return. See our VAT compliance service for how we register, prepare, review and file.
- Track your rolling 12-month supplies against the AED 375,000 line.
- Diarise the 28th-of-the-month filing date for every period.
- Classify every revenue stream as standard / zero-rated / exempt at source.
- Keep valid tax invoices for every input-VAT claim.
Tax rules current as at March 2023. This is general guidance, not a substitute for a formal engagement — confirm your position against the latest UAE Federal Tax Authority sources, or talk to us.