VAT has applied in the UAE since 1 January 2018 at a standard rate of 5%. It is collected by businesses on behalf of the Federal Tax Authority: you charge it on what you sell, recover it on what you buy, and pay the difference. Everything below follows from those three sentences.
Who has to register
Registration is mandatory once your taxable supplies and imports exceed AED 375,000 in the previous twelve months, or when you expect to exceed it in the next thirty days. Voluntary registration is available from AED 187,500, measured on supplies or on taxable expenses — which is why a pre-revenue business with real costs can often register and recover.
The four ways a supply can be treated
| Treatment | Tax charged | Input tax recovery | Typical examples |
|---|---|---|---|
| Standard-rated | 5% | كامل | Most goods and services supplied in the UAE |
| Zero-rated | 0% | كامل | Exports outside the GCC implementing states, international transport, certain healthcare and education, investment-grade precious metals |
| Exempt | None | Restricted | Certain financial services, bare land, local passenger transport, some residential property |
| Out of scope | None | Not applicable | Supplies made outside the UAE |
Zero-rated is taxable at nothing. Exempt is not taxable at all. Only one of them lets you recover input tax.
The reverse charge, in one paragraph
When you buy services from outside the UAE, the overseas supplier does not charge UAE VAT. Instead you account for the tax as if you had charged it to yourself, and — where the purchase relates to taxable activity — recover the same amount in the same return. The cash effect is usually nil; the disclosure is not optional. Software subscriptions, overseas consultants and foreign advertising platforms are the everyday cases.
What must appear on a tax invoice
A full tax invoice must be issued within 14 days of the date of supply and must show, at minimum:
- The words "Tax Invoice", clearly displayed.
- Your name, address and TRN.
- The customer's name, address and — where they are registered — their TRN.
- A sequential invoice number that identifies the document uniquely.
- The date of issue, and the date of supply where it differs.
- A description of the goods or services, with quantity and unit price.
- The amount payable excluding tax, any discount, the rate and amount of tax, and the gross amount.
- Where the invoice is in a foreign currency, the tax amount converted to AED at the Central Bank rate for the date of supply.
- Where the reverse charge applies, a statement that the customer must account for the tax.
A simplified tax invoice may be used for supplies to an unregistered customer, or to a registered customer where the consideration does not exceed AED 10,000. It carries less detail, but it is still a tax document — a till slip with no TRN on it is neither.
Records: five years, and the reason why
Invoices, credit notes, ledgers, import and export documents, and the calculations behind each return must be kept for five years from the end of the tax period they relate to — fifteen years for records relating to real estate. The requirement is not merely to hold the documents but to be able to produce the trail from a figure on a return back to the transaction behind it, which is an argument for one system rather than three folders and a spreadsheet.
The five errors that cost the most
- Recovering input tax with no valid tax invoice behind it.
- Treating exempt income as zero-rated, and over-recovering as a result.
- Missing the reverse charge on imported services entirely.
- Reporting standard-rated sales under the wrong emirate.
- Filing on time but paying late, on the assumption that they are one deadline.
Questions people actually ask
Do free zone businesses pay VAT?
Generally yes. Only supplies within and between the specific zones designated for VAT purposes get special treatment, and the rules there are about goods rather than services. Being in a free zone is not by itself an exemption.
Can I recover VAT on entertaining clients?
No. Input tax on entertainment provided to anyone who is not an employee is blocked, as is tax on certain motor vehicles available for private use.
What if my customer never pays?
Bad debt relief lets you recover the output tax you already paid, subject to conditions — the debt must be written off, more than six months old, and the customer notified.
Do I need to register for corporate tax as well?
Corporate tax is a separate regime with its own registration and returns. Being VAT-registered does not register you for it, and the thresholds are unrelated.
Is a PDF invoice acceptable?
Today, yes, if it carries the required fields. Once your e-invoicing phase begins, the legal invoice is the structured document exchanged over the network, and the PDF becomes a courtesy copy.
Where these facts come from
Checked against the following on 24 أغسطس 2026. Rules and dates change — if you are reading this long after that date, verify before you act on it.
- Federal Tax Authority — VAT
- Federal Decree-Law No. 8 of 2017 on Value Added Tax
- FTA VAT registration guide
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