Value Added Tax (VAT)

Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. The rate of VAT is 5 per cent. VAT will provide the UAE with a new source of income which will be continued to be utilised to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Read more about VAT on the websites of:

• Federal Tax Authority
• Ministry of Finance.

 VAT guidelines:

• VAT treatment for selected sectors (PDF, 218 KB)
• VAT for businesses (PDF, 2.6 MB)
• VAT for education (PDF, 1.81 MB)
• VAT for retailers (PDF, 6.09 MB)
• Guidance on zero-rated and exempt supplies (PDF, 1.44 MB)
• 10 things you need to know about VAT (PDF, 1.64 MB)
• VAT treatment of properties (PDF, 2.63 MB)
• VAT treatment for imported goods (PDF, 336 KB)
• Know your rights – Tax invoice (PDF, 4 MB)
• Know your rights – Education (PDF, 140 KB)
• Know your rights – Healthcare services (PDF, 139 KB)

Check more guides, references and public clarifications from the Federal Tax Authority.

View UAE tax laws and procedures (VAT and excise) on the website of the Federal Tax Authority.

Useful links:

• Federal decree-law No. 8 of 2017 on value added tax (PDF, 1 MB)
• UAE Cabinet Decision 52 of 2017 on the executive regulations of the Federal Decree Law No. (8) of 2017 on Value Added Tax
• Federal law by decree No. 13 of 2016 concerning the establishment of the Federal Tax Authority (PDF, 1.5 MB)
• VAT FAQs – Federal Tax Authority

Criteria for registering for VAT

• A business must register for VAT if its taxable supplies and imports exceeds AED 375,000 per annum.
• It is optional for businesses whose supplies and imports exceed AED 187,500 per annum.
• A business house pays the government, the tax that it collects from its customers. At the same time, it receives a refund from the government on tax that it has paid to its suppliers.
• Foreign businesses may also recover the VAT they incur when visiting the UAE.

Read more on VAT registration:

• VAT user guide – registration and deregistration (PDF)

How to register for VAT?

Businesses can register for VAT through the eServices section on the FTA website. However, they need to create an account first. For more details about VAT registration, please read VAT registration User Guide (PDF).

For general inquiries about tax registration and/or application, you may contact Federal Tax Authority through the enquiry form or send an email to info@tax.gov.ae. You can also call on 600 599 994 or 04-7775777.

How is VAT collected?

VAT-registered businesses collect the amount on behalf of the government; consumers bear the VAT in the form of a 5 per cent increase in the cost of taxable goods and services they purchase in the UAE.

UAE imposes VAT on tax-registered businesses at a rate of 5 per cent on a taxable supply of goods or services at each step of the supply chain.

Tourists in the UAE also pay VAT at the point of sale.

On which businesses does VAT apply?

VAT applies equally on tax-registered businesses managed on the UAE mainland and in the free zones. However, if the UAE Cabinet defines a certain free zone as a ‘designated zone’, it must be treated as outside the UAE for tax purposes. The transfer of goods between designated zones are tax-free.

Filing a return for VAT

At the end of each tax period, VAT registered businesses or the ‘taxable persons’ must submit a ‘VAT return’ to Federal Tax Authority (FTA).

A VAT return summarises the value of the supplies and purchases a taxable person has made during the tax period, and shows the taxable person’s VAT liability.

Liability of VAT

The liability of VAT is the difference between the output tax payable (VAT charged on supplies of goods and services) for a given tax period and the input tax (VAT incurred on purchases) recoverable for the same tax period.

Where the output tax exceeds the input tax amount, the difference must be paid to FTA. Where the input tax exceeds the output tax, a taxable person will have the excess input tax recovered; he will be entitled to set this off against subsequent payment due to FTA.

How to file VAT return?

You must file for tax return electronically through the FTA portal: eservices.tax.gov.ae. Before filing the VAT return form on the portal, make sure you have met all tax returns requirements.

When are businesses required to file VAT return?

Taxable businesses must file VAT returns with FTA on a regular basis and usually within 28 days of the end of the ‘tax period’ as defined for each type of business. A ‘tax period’ is a specific period of time for which the payable tax shall be calculated and paid. The standard tax period is:

• quarterly for businesses with an annual turnover below AED150 million
• monthly for businesses with an annual turnover of AED150 million or more.

The FTA may, at its choice, assign a different tax period for certain type of businesses. Failure to file a tax return within the specified time frame will make the violator liable for fines as per the provisions of Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE (PDF, 1 MB).