Value Added Tax (VAT) has been part of doing business in the United Arab Emirates since 2018, and the rules remain broadly stable in 2026. This guide explains the standard 5% rate, who must register, how zero-rated and exempt supplies differ, and how to file returns on the EmaraTax portal without triggering penalties.
The 5% VAT Rate and How UAE VAT Works
VAT in the UAE is a consumption tax charged at a standard rate of 5% on most goods and services supplied within the country. Registered businesses act as collection agents for the Federal Tax Authority (FTA): they charge VAT on their sales (output tax), reclaim VAT paid on their business costs (input tax), and remit the difference to the FTA when they file. The end consumer ultimately bears the cost, so a compliant business is broadly VAT-neutral.
VAT sits alongside, but is separate from, the UAE’s corporate tax regime. If you want the full picture of both taxes, read our companion UAE corporate tax 2026 guide, which covers the 9% rate and small-business relief.
Who Must Register: Mandatory vs Voluntary Thresholds
Registration depends on the value of your taxable supplies and imports over the past 12 months, or your expected supplies over the next 30 days.
Mandatory registration (AED 375,000)
You must register for VAT if your taxable supplies and imports exceeded AED 375,000 in the previous 12 months, or if you expect to cross that figure within the next 30 days. Businesses are required to apply within 30 days of becoming liable. Once registered, the FTA issues a 15-digit Tax Registration Number (TRN) that must appear on every tax invoice.
Voluntary registration (AED 187,500)
If your taxable supplies (or taxable expenses) exceed AED 187,500 but stay below the mandatory threshold, you may register voluntarily. This is often useful for start-ups and smaller firms that want to recover input VAT on set-up costs and appear established to corporate clients. Freelancers and consultants weighing this step may also find our UAE freelance visa guide useful when structuring their business.
Zero-Rated vs Exempt Supplies
Not every supply carries 5% VAT. The distinction between zero-rated and exempt matters because it decides whether you can recover the VAT on your related costs.
- Zero-rated (0%) supplies are still within the VAT system. You charge 0% but can recover input VAT on related expenses. These include exports of goods and services outside the GCC, international transport, certain investment-grade precious metals, newly constructed residential property (first supply), and qualifying healthcare and education services.
- Exempt supplies fall outside the VAT charge entirely, and you generally cannot recover input VAT tied to them. These include certain financial services (where earnings come from an implicit margin rather than an explicit fee), the lease and subsequent sale of residential property, bare land, and local passenger transport.
The practical takeaway: a zero-rated business can reclaim its input VAT, while a business making exempt supplies effectively absorbs the VAT on its costs. Businesses operating across the region should also check how each jurisdiction treats these categories in our GCC business setup guide.
Registering on EmaraTax
All VAT registration, filing, and payment is handled through the FTA’s EmaraTax portal. To register, create an account, verify your identity, and submit the business application with supporting documents. Have the following ready:
- Trade licence and, where relevant, certificate of incorporation
- Passport and Emirates ID copies of the owner and authorised signatories
- Proof of turnover, such as financial statements or an audited revenue report
- Bank account details (IBAN) and business contact information
Once the FTA approves the application, your TRN is issued and you can begin charging and reclaiming VAT.
Filing Returns and Deadlines
The FTA assigns each registered business a tax period. Most businesses file quarterly, while larger firms — typically those with annual turnover above AED 150 million — are assigned monthly periods. Your period is set by the FTA and shown on your EmaraTax dashboard.
VAT returns are due, and any tax owed is payable, within 28 days of the end of each tax period. For example, a quarter ending 31 March has a filing and payment deadline of 28 April. If the 28th falls on a weekend or public holiday, the deadline moves to the next working day. There is no separate payment date — filing and payment share the same deadline, so leave time for bank transfers to clear.
Recovering Input VAT
Input VAT is the 5% you pay on business purchases. You can recover it on your return provided the cost relates to making taxable (standard-rated or zero-rated) supplies, you hold a valid tax invoice, and the expense is genuinely for business. Some costs are blocked from recovery — notably entertainment provided to non-employees and, in most cases, personal-use motor vehicles. Where costs relate to exempt supplies, input VAT is not recoverable, and mixed-use businesses must apportion accordingly. Keep every tax invoice and record for at least five years, as the FTA can request them during an audit.
Penalties for Non-Compliance
The FTA enforces penalties automatically, with no grace period. Under Cabinet Decision No. 129 of 2025, the current framework includes:
- Late registration: a fixed penalty of AED 10,000, plus retroactive VAT on supplies made from the date you should have registered.
- Late filing: AED 1,000 for a first offence, rising to AED 2,000 for a repeat within 24 months.
- Late payment: interest accruing at 14% per annum, calculated monthly on the outstanding balance from the day after the due date.
- Incorrect return: a fixed penalty starting at AED 500 for a first error, alongside a voluntary-disclosure mechanism that reduces exposure when you self-correct before an FTA audit.
Because interest compounds monthly, correcting mistakes early through voluntary disclosure is almost always cheaper than waiting for the FTA to find them.
Frequently Asked Questions
What is the current VAT rate in the UAE?
The standard VAT rate is 5%, applied to most goods and services. Certain supplies are zero-rated at 0% (such as exports outside the GCC and qualifying healthcare and education), and some are exempt, meaning no VAT is charged and input VAT generally cannot be recovered.
When must a business register for VAT?
Registration is mandatory once taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to within the next 30 days. Businesses above AED 187,500 may register voluntarily, which is common for start-ups wanting to recover input VAT on early costs.
How often are VAT returns filed and when are they due?
Most businesses file quarterly, though the FTA assigns monthly periods to larger firms. Returns must be filed and any tax paid within 28 days of the end of each tax period, via the EmaraTax portal. Missing the deadline triggers an automatic late-filing penalty and interest on unpaid tax.
