VAT in the UAE — the basics
UAE VAT is 5% — among the lowest rates in the world. It applies to most goods and services supplied within the UAE. Companies with annual taxable supplies above AED 375,000 must register; those between AED 187,500 and AED 375,000 may register voluntarily (and often should, to recover input VAT).
The compliance load is real: quarterly returns, exact input/output reconciliation, designated-zone treatment for Free Zones, and the FTA’s sharp eye on unusual refund claims. Get your VAT compliance right and it’s a non-event; get it wrong and the FTA will keep you busy for months.
Where VAT actually trips companies up
Reverse-charge mechanismImports, services from abroad, and certain Free Zone supplies use reverse charge — easy to miss, expensive when audited.
Designated zonesSpecific Free Zones are treated as outside-the-UAE for VAT — but only on goods, not services. Easy to misapply.
Input VAT recoveryNot every input is recoverable — entertainment, personal-use items, fuel for private vehicles often blocked.
Bad-debt reliefSix months past due — you can claim back the VAT on unpaid invoices. Many SMEs miss this.
Filing rhythmMost companies file quarterly. Cash-flow timing of VAT payments matters more than people realise.
Penalties5% per month on late payments, AED 1,000+ per missed filing, AED 1,000+ for incorrect returns.
What’s included in our VAT service
- VAT registration with the FTA (mandatory above AED 375K turnover)
- Voluntary registration where input recovery makes it worthwhile
- Tax invoice template and POS system review for compliance
- Quarterly return preparation: input/output reconciliation, reverse charge, designated-zone treatment
- Submission to the FTA portal and payment scheduling
- Refund claim preparation and submission
- Bad-debt relief claims (recover VAT on unpaid invoices over 6 months old)
- FTA audit and inquiry support
- Voluntary disclosure preparation when historical errors are found
Common refund situations
- Exporters — exports are zero-rated; input VAT on local purchases is recoverable
- Designated-zone Free Zones — VAT-free on goods but input VAT on operational expenses (utilities, rent) is recoverable
- New companies — early-stage spending often exceeds revenue; net refund position
- Tourists and visitors — recoverable on certain purchases through the Tax Refund for Tourists Scheme
