The UAE introduced VAT in January 2018 at 5% — one of the lowest VAT rates globally — administered by the Federal Tax Authority (FTA). Understanding the UAE's VAT framework is essential for every business operating in Dubai, Abu Dhabi, Sharjah, or any of the Emirates.
Registration Thresholds
- Mandatory registration: Annual taxable supplies exceed AED 375,000
- Voluntary registration: Available from AED 187,500
- Register through the FTA online portal at tax.gov.ae
VAT Rates by Supply Type
| Supply Category | VAT Rate |
|---|---|
| Most goods and services | 5% |
| International exports | 0% |
| Basic food items | 0% |
| Healthcare services | 0% |
| Education (nursery to university) | 0% |
| Financial services | Exempt |
| Residential property (rental) | Exempt |
Filing Frequency and Deadlines
- Quarterly (most businesses): Within 28 days of quarter end
- Monthly (large taxpayers): Within 28 days of month end
- All returns and payments are submitted exclusively through the FTA portal
VAT in UAE Free Zones
UAE free zones (JAFZA, DIFC, ADGM, etc.) operate under a special VAT framework:
- Transactions between two Designated Zone companies may be outside scope of VAT
- Moving goods from a free zone to the UAE mainland triggers VAT
- Most free zones are treated as "outside the UAE" for VAT purposes
- Services between free zones and mainland are standard-rated at 5%
UAE Corporate Tax (9%) — A Related Obligation
In addition to VAT, the UAE introduced a 9% Corporate Income Tax in 2023 on profits exceeding AED 375,000. This is separate from VAT but tracked through the same FTA compliance infrastructure. (See our dedicated CIT article for full details.)
Common Penalties
- Late registration: AED 20,000
- Late return (first time): AED 1,000; AED 2,000 for repeat
- Error in return (uncorrected): AED 3,000
- Failure to keep records 5 years: AED 10,000–50,000
What Makes UAE VAT Compliance Unique
- FTA conducts electronic audits without advance notice
- Tax payments are restricted to bank transfers to FTA accounts
- Self-reported errors attract lower penalties than audit-discovered ones
- VAT grouping is available for related companies (simplifies compliance)
Erpegy calculates UAE VAT on every invoice automatically, prepares quarterly VAT returns ready for FTA submission, and alerts you to deadlines — all with your VAT registration number and amounts split before and after tax on every document.