UAE VAT Overview
The UAE implemented a 5% Value Added Tax (VAT) on January 1, 2018. VAT applies to most goods and services, with exemptions for healthcare, education, certain financial services, and zero-rated items like exports and international transportation.
All businesses above the threshold must register and charge VAT on their invoices.
Who Must Register?
Mandatory Registration (must register):
- Taxable supplies exceeding AED 375,000 in past 12 months or expected in next 30 days
Voluntary Registration (can register):
- Taxable supplies or expenses exceeding AED 187,500
- Useful for reclaiming input VAT on purchases
No Registration Needed:
- Below AED 187,500 in taxable supplies
How to Register for VAT
- Create account on FTA portal (eservices.tax.gov.ae)
- Complete the VAT registration form
- Upload documents: trade license, passport, Emirates ID, bank details
- Submit and wait for approval (5-20 business days)
- Receive your Tax Registration Number (TRN)
Your TRN must appear on all invoices once registered.
VAT Filing and Payment
- Frequency: Quarterly (most businesses) or monthly (turnover above AED 150M)
- Deadline: 28 days after end of each tax period
- What to file: VAT return showing output VAT collected minus input VAT paid
- Payment: Net VAT due must be paid by the filing deadline
- Refunds: If input VAT exceeds output VAT, you can claim a refund from FTA
Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Late registration | AED 10,000 |
| Late filing (first time) | AED 1,000 |
| Late filing (repeat) | AED 2,000 |
| Late payment | 2-4% of unpaid tax monthly |
| Incorrect return | AED 1,000 - 5,000 |
| Tax evasion | Up to 3x evaded amount |
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Frequently Asked Questions
Is VAT applicable to free zone companies?
It depends. Designated free zones have special VAT rules. Goods within designated zones may be exempt, but services are generally subject to VAT. Consult us for your specific case.
Can I register for VAT voluntarily?
Yes, if your taxable supplies or expenses exceed AED 187,500. Voluntary registration lets you reclaim VAT on business purchases.
What is the difference between VAT and corporate tax?
VAT (5%) is charged on goods/services and collected from customers. Corporate tax (9%) is on your business profits. They are separate obligations.