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UAE VAT is a 5% tax on most supplies of goods and services and on imports. You register once your taxable supplies pass AED 375,000 in a year, you file a return every tax period, and you pay on the same date.
Source: Federal Tax Authority, VAT Law and registration page, checked .
When did VAT start in the UAE, and which law applies?
VAT is governed by Federal Decree-Law No. 8, in force since . It has been amended several times. The changes in force on include:
- Decree-Law 18, effective .
- Decree-Law 16, effective .
- A later Decree-Law 16, effective .
The latest amendment removes the need for a self invoice under the reverse charge (you still keep supporting documents). It also sets a limit of five years for claims to reclaim excess refundable tax, and lets the FTA deny input tax where a supply is part of a tax evasion arrangement.
Source: Federal Tax Authority, VAT Law and amendments; Ministry of Finance news on the VAT amendments, checked .
The Executive Regulation was also amended by Cabinet Decision No. 149. It covers medical products, employee accommodation, input tax apportionment and limits on input tax recovery for large cash payments. The cash threshold is to be set by the Minister: check the current rule on the FTA site.
Who must register for VAT?
| Situation | Threshold or time limit |
|---|---|
| Mandatory registration | Taxable supplies and imports above AED 375,000 over the previous 12 months, or expected to pass it in the next 30 days |
| Voluntary registration | AED 187,500 of taxable supplies, imports or taxable expenses |
| Time to apply | 30 days from the date you must register |
Source: Federal Tax Authority, Registration for VAT, checked .
Full steps are on the VAT registration page. A late application carries a penalty of AED 10,000, covered in VAT penalties.
How often is a VAT return due?
The standard tax period is three calendar months. The FTA can set shorter or longer periods. The return and the tax due must reach the FTA by the 28th day after the period ends. If you cancel your registration you file a final return for the last period.
Source: Federal Tax Authority, VAT Executive Regulation, Articles 62 and 64, checked .
Two worked dates: a quarter ending 31 December is due 28 January, and a quarter ending 31 March is due 28 April. A monthly period ending 31 October is due 28 November. The FTA website showed a banner with a final filing date at the end of November on the day this page was checked, and the reason was not confirmed. Check your own deadline on EmaraTax. See VAT return filing for how to prepare one.
What is the difference between zero rated and exempt supplies?
Some supplies are taxed at 0%, which is different from exempt. A zero rated supply is a taxable supply at a rate of 0%: you charge no VAT but can still recover the VAT on your costs. An exempt supply is outside the tax charge altogether, and input VAT on costs linked to it generally cannot be recovered. That is why the difference matters more to the seller than to the buyer. The Executive Regulation lists, among others, export of services in listed cases, investment precious metals, the first sale or lease of certain buildings and zero rated education related supplies. Conditions apply to each. This is a short list from the section headings of the regulation, so read the full conditions on the FTA site before you treat a sale as zero rated. The full list of exempt supplies is not set out here: check Article 46 of the VAT law.
Source: Federal Tax Authority, VAT Executive Regulation, checked .
How does VAT work in designated zones?
Designated zones are covered by Articles 50 to 52 of the VAT law. If you break the conditions for keeping or moving goods in one, the fine is the higher of AED 50,000 or 50% of the tax on the goods. The list of zones comes from a Cabinet Decision that has been updated, so check the current list on the FTA site.
Source: Federal Tax Authority, VAT Law and Cabinet Decision No. 40 as amended, checked .
What is the reverse charge in UAE VAT?
Under the reverse charge, the buyer accounts for the VAT instead of the seller. The common case is a VAT registered business in the UAE that imports goods or buys services from a supplier abroad: it declares the VAT in its own return as output tax and, where the purchase is for taxable business use, recovers the same amount as input tax in that return. The FTA also applies the reverse charge to some listed domestic supplies between registrants; check the FTA guide for your goods.
From no self invoice is needed under the reverse charge, but you must keep the supporting documents. Failing to account for tax under the reverse charge is charged at 14% a year, calculated monthly on the unpaid amount.
Source: Ministry of Finance news on the VAT amendments and Cabinet Decision No. 40 as amended, checked .
What must a UAE VAT tax invoice show?
A full tax invoice must show:
- the words "Tax Invoice"
- the supplier's name, address and TRN
- the recipient's name, address and TRN, if the recipient is registered
- a sequential invoice number and the issue date
- the supply date, if different from the issue date
- a description of the goods or services
- for each line: unit price, quantity, tax rate and tax amount in AED
- any discount
- the gross amount and the tax amount in AED, with the exchange rate if converted
- a reverse charge statement, where it applies
A simplified tax invoice needs less: the words "Tax Invoice", the supplier's name, address and TRN, the issue date, a description, and the total and tax amount in AED. A wholly zero rated supply does not always need a tax invoice if your records are enough. Not issuing a tax invoice carries a penalty of AED 2,500 per case.
Source: VAT Executive Regulation, Article 59, checked . E-invoicing adds its own rules as it phases in; see e-invoicing in the UAE.
What is the profit margin scheme?
The profit margin scheme lets a business that sells eligible second hand goods, antiques or collector's items charge VAT on its margin rather than on the full selling price, when the conditions in the VAT law are met. You must tell the FTA you are using it: not notifying the FTA carries a penalty of AED 2,500. Check the conditions in the VAT law before you apply the scheme to any sale.
What is a VAT voluntary disclosure?
A voluntary disclosure is how you correct an error in a VAT return you have already filed, through EmaraTax. If the error changes the tax due, the penalty is 1% per month on the tax difference. If you only correct it after the FTA has told you about an audit, it becomes a fixed 15% of the tax difference plus 1% per month. An incorrect return carries AED 500, which is not charged if you fix it before the filing deadline or by a voluntary disclosure that does not change the tax due.
Source: Cabinet Decision No. 40 as amended, checked . Our VAT penalties page has the full table.
Other VAT topics
- VAT refund: the FTA must decide on a refund application within 20 business days.
- VAT deregistration: apply within 20 business days of the triggering event.
- VAT certificate: what it is and where to find it.
- VAT consultants: when to ask a firm for help.
How long must I keep VAT records?
Keep VAT records for five years after the tax period. Records related to real estate must be kept for 15 years. See record keeping rules for the wider picture.
Source: Federal Tax Authority, Tax Procedures and VAT Executive Regulations, checked .
This page is general information from official sources, not tax advice. DubaiAccountingFirms.com is not the Federal Tax Authority. If you want a firm to handle your VAT, send the form below and compare the replies.
