The UAE put the Value Added Tax (VAT) on January 1, 2018, as a method to look for different means of generating income. Moreover, it is an indirect tax on goods and services purchased and consumed. Most of the products and services in the UAE will be charged VAT at a rate of 5%, along with few exceptions and zero-rated supplies.
Types of VAT in UAE
| Category | VAT Rate | Examples | Notes |
| Standard Rate | 5% | Electronics, clothing, restaurants, hotels | Applies to most goods and services |
| Zero-Rated | 0% | Healthcare, education, exports, medicines | Businesses can claim VAT refunds |
| Exempt Items | No VAT | Financial services, residential rent, local transport | No VAT is applied |
| VAT Registration (Mandatory) | - | Businesses with annual taxable sales above AED 375,000 | Required for compliance |
| VAT Registration (Voluntary) | - | Businesses with annual taxable sales between AED 187,500 - 375,000 | Optional for small businesses |
| VAT Penalty (Late Filing) | AED 1,000 (first time) | AED 2,000 (repeated within 24 months) | Failure to submit VAT returns on time |
| VAT Penalty (Late Payment) | 2% (immediate) + 4% (7th day) + 1% daily (up to 300%) | Delay in VAT payment to FTA | Strict penalties app |
There are mainly three types of VAT types in the UAE: Standard Rate VAT (5%): This VAT normally applies on goods and services. Zero Rated VAT (0%): It is for services like exports, health care, and education. Exempt VAT: This type of VAT applies on financial services, residential properties, and Local passenger transport. Furthermore, the VAT exemption list in UAE is helpful to view details of goods and services that are VAT exempted.
VAT Registration UAE
Businesses in the UAE are obligated to register for VAT if they fit one of these requirements:
Mandatory Registration
If your turnover of yearly taxable income goes beyond AED 375,000.
Voluntary Registration
If your turnover of yearly taxable income is somewhere from AED 187,500 to AED 375,000. Businesses need to access the Federal Tax Authority (FTA) portal to finalize VAT Registration UAE. Like any online process, they will be required to provide their business and financial details along with supporting documents.
How to Claim VAT in UAE
To register for VAT in UAE, follow the steps below.
- Go to the FTA website.
- Sign up for an FTA account.
- Provide the necessary details in the VAT registration form.
- Upload supporting documents such as trade licenses and audited financial statements.
- Obtain your Tax Registration Number (TRN).
In addition, businesses must also issue VAT invoices, pay VAT, and file their returns every quarter.
UAE VAT Calculator
Individuals and businesses can determine the tax amount applicable to their transaction using the VAT calculator UAE. The formula is: VAT Amount = (Price x 5%) Total Price with VAT = Price + VAT Amount. For example, a VAT of normally AED 50 will be charged from the customer if a good costs AED 1,000. Therefore, the total payment will be AED 1,050.
Payment and Filing of VAT in UAE Online
Filing for VAT returns can only be done through the FTA portal. Businesses have to submit their VAT returns within 28 days after the closing of each tax cycle. Payments can be made through the FTA portal using e-Dirham, credit card, or even through bank transfers.
VAT in Dubai and the United Arab Emirates
The VAT in Dubai, Abu Dhabi, Sharjah, and the rest of the Regions are charged uniformly as all Emirates are included. In addition, businesses have to follow the VAT rules no matter their position.
VAT Law UAE PDF
For more information, businesses can access the VAT law UAE PDF from the FTA website. Moreover, this document explains in detail the tax compliance, exemptions, and penalties guidelines.
Corporate Tax UAE and Its Relation to VAT
VAT is considered to be an indirect tax while the corporate tax UAE refers to the direct form of tax for a business. Recently the UAE government imposed a 9% corporate tax which came into force on June 1,2023 for businesses with profits over AED 375,000 annually. VAT and corporate tax are two different types of taxes but they cannot be separated when dealing with financial planning.
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Emila Hales
My name is Emila Hales. I've been living in the UAE for the past five years, and I absolutely love traveling. Writing about my travel experiences is something I enjoy, and I'm excited to share my adventures with others who are passionate about exploring new places.
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