What is UAE VAT?
Value Added Tax (VAT) was introduced in the UAE on January 1, 2018 at a flat rate of 5% — one of the lowest VAT rates in the world. It is a consumption tax levied on most goods and services supplied in the UAE and is administered by the Federal Tax Authority (FTA).
Businesses must register for VAT if their taxable supplies and imports exceed AED 375,000 per year (mandatory registration threshold). Voluntary registration is available for businesses with supplies exceeding AED 187,500 per year.
VAT Registration Thresholds
| Type | Annual Taxable Turnover | Status |
|---|
| Mandatory Registration | Exceeds AED 375,000 | Must register within 30 days |
| Voluntary Registration | AED 187,500 – AED 375,000 | Optional but beneficial |
| Exempt from Registration | Below AED 187,500 | Not required |
VAT Rates in UAE
| Category | VAT Rate | Examples |
|---|
| Standard Rate | 5% | Most goods and services |
| Zero Rate | 0% | Exports, international transport, certain food items, healthcare, education |
| Exempt | No VAT | Bare land, residential property rental (after first supply), local passenger transport |
VAT Return Filing
| Filing Frequency | Tax Period | Due Date |
|---|
| Quarterly (default) | Every 3 months | 28th of the month following quarter end |
| Monthly | Assigned by FTA to large taxpayers | 28th of following month |
Penalties for VAT Non-Compliance
| Violation | Penalty |
|---|
| Failure to register on time | AED 20,000 |
| Failure to file VAT return | AED 1,000 (first time), AED 2,000 (repeat) |
| Late payment of VAT | 2% immediately + 4% after 7 days + 1% daily (max 300%) |
| Failure to maintain records | AED 10,000 (first offence), AED 50,000 (repeat) |
