VAT in UAE: 5% Rate, Registration Threshold, Exemptions & Filing Rules

Value Added Tax (VAT) in the UAE is charged at a standard rate of 5% on most goods and services, and has applied since 1 January 2018. Businesses must register for VAT once their taxable supplies and imports exceed AED 375,000 in a year, file returns through the FTA's EmaraTax portal, and pay any VAT due within 28 days of the end of each tax period.

This guide covers the full VAT picture for UAE businesses in 2026: rates and what falls under each, registration and deregistration, invoicing and filing rules, input tax recovery, free zone and designated-zone treatment, industry-specific rules, the e-invoicing rollout, and the penalties that apply when things go wrong.

What is VAT in the UAE?

VAT is an indirect tax on the consumption of goods and services, collected in stages along the supply chain and ultimately borne by the final consumer. Registered businesses act as collection agents for the Federal Tax Authority (FTA): they charge VAT on their sales (output VAT), reclaim the VAT paid on their business purchases (input VAT), and remit the difference.

The legal foundation is Federal Decree-Law No. 8 of 2017, significantly amended by Federal Decree-Law No. 18 of 2022 with effect from 1 January 2023, and implemented through Executive Regulations that were comprehensively updated by Cabinet Decision No. 100 of 2024, effective 15 November 2024. The UAE introduced VAT as part of a GCC-wide framework agreement, and at 5% it remains one of the lowest VAT rates in the world.

How VAT works — with a worked example

VAT is charged at every stage of production and distribution, but the credit mechanism means each business only bears tax on the value it adds.

UAE VAT rates: 5%, zero-rated and exempt

The UAE VAT system has three categories of supply, and the distinction between zero-rated and exempt matters enormously for input tax recovery.

Standard-rated supplies (5%)

The default. Unless a supply is specifically zero-rated or exempted in the law, 5% applies — retail goods, professional and consultancy services, commercial property sales and rentals, utilities, electronics, food and beverages, hotel stays, and imported goods.

Zero-rated supplies (0%)

Taxable at 0%, which means the supplier charges no VAT but keeps full input VAT recovery:

• Exports of goods and services outside the GCC implementing states
• International transportation of passengers and goods, and certain related supplies
• Supply of crude oil and natural gas
• The first supply of residential buildings within three years of completion
• Qualifying educational services and related goods supplied by recognised institutions
• Qualifying healthcare services and related goods and medicines
• Investment-grade precious metals (e.g., gold of 99% purity or higher)

Exempt supplies

No VAT is charged, and input VAT attributable to these supplies cannot be recovered:

• Financial services remunerated through margins or spreads rather than explicit fees (and, following the 2024 Executive Regulation updates, the management of investment funds and transfers of virtual assets)
• Residential buildings — sales and leases after the zero-rated first supply
• Bare land
• Local passenger transport (road, sea and air within the UAE)

VAT registration: thresholds, process and documents

Mandatory registration. A business must register once its taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to exceed it in the next 30 days. Registration must be completed within 30 days of becoming liable; late registration carries an AED 10,000 penalty.

Voluntary registration. Available where taxable supplies and imports (or taxable expenses) exceed AED 187,500. Startups often register voluntarily to recover input VAT on setup costs and to look established to corporate customers.

Non-residents. There is no threshold for non-resident businesses making taxable supplies in the UAE on which no other party accounts for the VAT — registration is required from the first dirham.

How to register. Registration is free and fully online via the FTA's EmaraTax portal (eservices.tax.gov.ae): create an account, complete the VAT registration form, upload documents, and receive your Tax Registration Number (TRN) — typically within about 20 business days if the application is complete.

Documents you'll need:

• Trade licence
• Passport and Emirates ID copies of the owner(s) and authorised signatory
• Proof of business address and activities
• Financial statements or other turnover evidence
• Bank account details (IBAN letter)
• Contact details of the authorised signatory, and customs registration details if importing

A note for smaller businesses: VAT registration and Corporate Tax registration are separate obligations with different thresholds — VAT at AED 375,000 turnover, while corporate tax registration applies regardless of size (with Small Business Relief now extended to 2029 easing the burden below AED 3 million revenue).

VAT invoicing rules

Every VAT-registered business must issue compliant tax invoices for taxable supplies, within 14 days of the date of supply:

• Full tax invoice — required for B2B supplies and any supply above AED 10,000. Must show: the words "Tax Invoice", supplier name, address and TRN, customer name and address (and TRN where applicable), a sequential invoice number, issue date and date of supply, description, quantity and unit price of goods/services, amounts excluding VAT, the VAT rate and amount per line, the gross total, and a reverse-charge statement where applicable.
• Simplified tax invoice — permitted for B2C supplies and supplies of AED 10,000 or less; fewer mandatory fields.
• Amounts must be in AED (or show the AED equivalent using approved exchange rates); credit notes must be issued as tax credit notes to adjust previously invoiced VAT.

From 2026–27 these invoices progressively become structured e-invoices — see the e-invoicing section below.

Filing VAT returns and paying the FTA

Filing frequency is set by the FTA based on turnover:

The deadline for both filing and payment is 28 days after the end of the tax period (where the 28th falls on a weekend or holiday, the next business day). The return — form VAT 201 on EmaraTax — reports standard-rated supplies by emirate, zero-rated and exempt supplies, imports under the reverse charge, recoverable input tax, and any corrections.

Payment is made through EmaraTax via GIBAN bank transfer, eDebit, or card. If output VAT exceeds input VAT, you pay the difference; if input VAT is higher, the excess is carried forward or can be reclaimed as a VAT refund through form VAT 311.

Record-keeping: VAT records — invoices, credit notes, import/export documents, accounting records — must be retained for at least 5 years (longer for real estate: 15 years).

Input VAT recovery: what you can and can't claim

Registered businesses recover input VAT on costs incurred to make taxable (standard and zero-rated) supplies. Recovery is claimed in the return for the period in which the invoice is received and payment is made or intended within six months.

Not recoverable:

• Entertainment costs for non-employees
• Motor vehicles available for personal use
• Employee benefits provided without a legal or contractual obligation (health insurance mandated by law — as in Dubai and Abu Dhabi — remains recoverable)
• Any input VAT attributable to exempt supplies

Apportionment. Mixed businesses (taxable + exempt supplies) recover input tax proportionately, with an annual wash-up adjustment. Capital assets above AED 5 million follow a multi-year adjustment scheme (10 years for buildings, 5 for other assets) if their use changes between taxable and exempt activity.

VAT in free zones and designated zones

A free zone licence is not an automatic VAT exemption — free zone companies register at the same AED 375,000 threshold and charge VAT like anyone else. Special treatment applies only to Designated Zones: specific fenced, customs-controlled zones listed by Cabinet Decision (examples include JAFZA, KEZAD zones and SAIF Zone).

Even then, the special treatment mainly concerns goods:

• Goods transferred between two Designated Zones (or held within one) can be outside the scope of UAE VAT, subject to conditions.
• Goods sold from a Designated Zone into the mainland are treated as imports — VAT applies.
• Services supplied in Designated Zones follow normal rules — 5% where taxable.

Which zone you're in therefore has real VAT consequences. If you're still choosing a jurisdiction, our complete list of UAE free zones explains each zone's focus — and remember that Qualifying Free Zone Person status under Corporate Tax is an entirely separate test from VAT designated-zone status; the two are routinely confused.

Cross-border transactions: imports, exports and reverse charge

• Exports of goods outside the GCC implementing states are zero-rated, provided official and commercial export evidence is retained.
• Exports of services are generally zero-rated where the recipient is outside the UAE and the service isn't connected to UAE real estate or goods — but the conditions tightened under the 2024 Executive Regulation updates; documentation matters.
• Imports of goods attract 5% VAT. Registered importers account for it via the reverse charge in their return (a cash-flow-neutral bookkeeping entry when fully recoverable); unregistered importers pay at customs.
• Imports of services are self-accounted under the reverse charge at 5%. Note: since 1 January 2026, under Federal Decree-Law No. 16 of 2025, businesses no longer need to issue self-invoices for reverse-charge purchases — the supplier's invoice, contract and import documents suffice as records, though the VAT is still declared in the return exactly as before.
• Tourists can reclaim VAT on purchases of AED 250+ from registered retailers through the Planet Tax Free scheme, with export of the goods verified within 90 days.

Industry-specific VAT rules

• Education: Tuition by recognised institutions (nursery to higher education) is zero-rated; uniforms, devices and most extracurriculars are 5%.
• Healthcare: Qualifying treatment and many medicines are zero-rated; elective/cosmetic services and some supplies are 5%.
• Real estate: Commercial sales and leases — 5%. First supply of new residential property within three years — 0%. Later residential sales and leases — exempt. Bare land — exempt. Hotels and serviced apartments — 5%.
• Transport: Local passenger transport — exempt. International transport — zero-rated. Commercial vehicles designed for 10+ passengers — zero-rated.
• Oil & gas: Crude oil and natural gas — zero-rated; refined products at the pump — 5%.
• Financial services: Margin-based products — exempt; fee-based services — 5%. Fund management and virtual asset transfers became exempt under the November 2024 Executive Regulation changes (with retrospective effect for virtual assets to 2018 — a technical area where advice pays for itself).

E-invoicing in the UAE: 2026–2027 rollout

The UAE is moving from PDF-and-paper invoices to structured electronic invoicing exchanged through Accredited Service Providers (ASPs) on the Peppol "5-corner" model, with near-real-time reporting to the FTA. The framework was established by Federal Decree-Law No. 16 of 2024, with the system and timeline set out in Ministerial Decisions No. 243 and 244 of 2025.

The timeline every UAE business should have in its calendar:

B2C invoicing remains out of scope for now. E-invoices must be issued in structured formats (XML/JSON) following the UAE data dictionary — meaning accounting systems, not just processes, need updating. Businesses on modern cloud platforms (Zoho Books, Xero, QuickBooks and similar) will receive much of this through vendor updates; businesses invoicing from Word and Excel will not. If that's you, 2026 is the year to move — Stevva's accounting services migrate businesses onto compliant systems ahead of their go-live date.

Penalties for VAT non-compliance

Penalty amounts derive from Cabinet Decision No. 49 of 2021 and subsequent amendments; the FTA also runs periodic penalty-relief and instalment programmes. The pattern across all of them: voluntary disclosure is always cheaper than discovery.

Common VAT mistakes we see in practice

Working with businesses across the UAE mainland and free zones, the same errors surface again and again:

1. Registering late because "we're in a free zone." The AED 375,000 threshold applies to free zone companies too. The AED 10,000 penalty arrives with the TRN.
2. Treating exempt and zero-rated as the same. Landlords with mixed residential/commercial portfolios routinely over-recover input VAT on the exempt residential side.
3. Recovering VAT on disallowed costs — staff entertainment, cars with private use, non-mandated benefits. These are the first lines an FTA auditor checks.
4. Missing the reverse charge on imported services. Foreign software subscriptions, overseas consultants, Google and Meta advertising — all reverse-chargeable. Skipping it understates both output and input VAT and shows up instantly in an audit.
5. Charging 5% on exports without documentation, or 0% without proof. Zero-rating is earned by evidence; keep the export paper trail.
6. Filing nil returns while trading. A surprisingly common startup error — the FTA cross-checks against customs data, bank flows and, soon, e-invoicing feeds.
7. Ignoring the corporate tax interaction. VAT turnover figures now sit next to corporate tax filings; inconsistencies between the two trigger queries. Keep one set of truthful books feeding both.

Deregistering from VAT

Apply for deregistration through EmaraTax within 20 business days of ceasing taxable supplies, or when taxable turnover falls below AED 187,500 over 12 months (deregistration is optional between AED 187,500 and AED 375,000). All outstanding returns must be filed and liabilities settled before the FTA approves. Late deregistration costs AED 1,000 per month, capped at AED 10,000 — an easily avoided fee that catches many businesses winding down.

Official government resources

Frequently asked questions