Key takeaways
- UAE VAT rate: The standard VAT rate is 5%, with a 0% rate applied to certain goods and services such as exports and international transport.
- Registration threshold: Businesses with taxable turnover over AED 375,000 must register for VAT via the UAE Federal Tax Authority (FTA) portal.
- Compliance & filing: VAT returns are typically filed quarterly, and late submissions or payments can result in penalties and interest charges.
If you’re thinking of expanding your business into the United Arab Emirates (UAE), you need to have a good grasp of the country’s VAT (Value Added Tax) system. This guide offers essential insights into the UAE VAT framework, helping you to effectively manage this aspect of your business operations in the UAE.
What is the UAE VAT rate?
The UAE only introduced VAT in 2018, and the current standard UAE VAT rate, applied to most goods and services, is 5%. There is also a 0% UAE VAT rate, which applies to a limited number of goods and services.
Registering for VAT in UAE
The UAE VAT registration threshold for resident businesses is AED 375,000 in annual taxable turnover. Businesses exceeding this threshold must register for UAE VAT. The voluntary registration threshold is AED 187,500. There is no registration threshold for non-resident businesses.
UAE VAT registration can be done electronically via the UAE Federal Tax Authority (FTA). Once your application has been submitted, it usually takes between two and three weeks to receive your VAT number UAE.
Fiscal representative in the UAE
When registering for VAT in UAE, foreign companies are required to appoint a fiscal representative. This representative will be jointly responsible for ensuring compliance with VAT laws in the UAE.
UAE VAT return filing and penalties
Businesses are typically required to file a UAE VAT return every quarter, although the FTA may request monthly filings under certain circumstances. VAT returns and payments are due on the 28th of the month following the end of the reporting period. UAE VAT returns should be submitted electronically via the FTA Portal.
Missed VAT return deadlines will result in a fine of AED 1,000. If multiple violations occur within 24 months, the fine will be doubled to AED 2,000. Failure to pay UAE VAT by the deadline will incur penalty interest of 2% with interest of 4% added for every month the amount remains unpaid.
Reverse charge in the UAE
The reverse charge mechanism primarily applies to VAT-registered businesses in the UAE. This mechanism is used for transactions where goods or services are imported from outside the GCC (Gulf Cooperation Council) to the UAE. In such cases, the responsibility for reporting the VAT transaction shifts from the seller to the buyer.
Frequently asked questions
What is the standard VAT rate in the UAE?
The standard VAT rate in the UAE is 5%, applied to most goods and services. A 0% VAT rate applies to specific categories like exports, international transport, crude oil and gas, and certain educational services.
When do I need to register for VAT in the UAE?
You must register if your annual taxable turnover exceeds AED 375,000. Voluntary registration is available from AED 187,500. Non-resident businesses must register regardless of turnover.
How do I register for VAT in the UAE?
Registration is done online through the UAE Federal Tax Authority (FTA) portal. The process typically takes 2–3 weeks to receive your VAT number.
Do foreign businesses need a fiscal representative in the UAE?
Yes. Non-resident businesses must appoint a fiscal representative who shares responsibility for VAT compliance in the UAE.
How often do UAE VAT returns need to be filed?
Most businesses file quarterly, though some may be required to file monthly. Returns and payments are due by the 28th of the month following the tax period.
