UAE VAT (Value Added Tax)
A comprehensive guide to Value Added Tax in the United Arab Emirates, including rates, registration requirements, and compliance obligations.
What is UAE VAT?
Value Added Tax (VAT) is an indirect consumption tax levied on goods and services at each stage of the supply chain where value is added. The UAE implemented VAT on January 1, 2018, as part of the GCC-wide agreement to introduce a unified VAT framework. The standard VAT rate in the UAE is 5%.
VAT Rates in UAE
Applied to most goods and services in the UAE
Applied to exports, international transport, newly constructed residential buildings, healthcare, and education
Financial services, residential property sales and leases, bare land, local passenger transport
VAT Registration Thresholds
- Mandatory Registration: Businesses with taxable supplies exceeding AED 375,000 annually must register for VAT
- Voluntary Registration: Businesses with taxable supplies or expenses exceeding AED 187,500 may voluntarily register
- Foreign Businesses: Non-UAE businesses making taxable supplies in the UAE must register regardless of threshold
VAT Return Filing
VAT-registered businesses must file periodic VAT returns with the Federal Tax Authority (FTA) through the EmaraTax portal. The filing frequency depends on your annual turnover:
Quarterly Filing
Most businesses file quarterly VAT returns within 28 days after the end of each tax period.
Monthly Filing
Large businesses with turnover exceeding AED 150 million may be required to file monthly.
Key VAT Compliance Requirements
- 1 Tax Invoices: Issue compliant tax invoices for all taxable supplies with TRN, VAT amount, and other mandatory details
- 2 Record Keeping: Maintain records for at least 5 years (15 years for real estate)
- 3 Input Tax Recovery: Only claim input VAT on eligible business expenses with valid tax invoices
- 4 Reverse Charge: Account for VAT on imported services from abroad
VAT Penalties
The FTA imposes penalties for non-compliance with VAT regulations:
- Late registration: AED 10,000
- Late filing: AED 1,000 (first offense), AED 2,000 (repeat within 24 months)
- Late payment: 2% immediately, 4% after 7 days, 1% daily (max 300%)
- Incorrect return: AED 3,000 (first offense), AED 5,000 (repeat)
Related Terms
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