Value-added tax (VAT) is a tax on consumption. It’s levied at each stage of the supply chain; businesses pay VAT and reclaim input VAT; then the final consumer pays the full tax.
VAT was introduced to the United Arab Emirates (UAE) on January 1, 2018, to enhance fiscal resources, strengthen the federal budget, make it easier for the government to provide high-quality public services, and lessen the country’s economic dependence on oil.
When VAT was introduced, the standard rate was 5%. However, like in many countries that collect VAT, there are exemptions and zero-rated items. The rules have also evolved, with some major changes taking effect in January 2026.
This guide will explain how VAT works in the UAE, recent changes to the rules, and how companies doing business in the UAE can ensure that they comply with relevant laws.
Overview of UAE VAT
VAT is a tax on the import and supply of goods and services. It’s charged at each taxable supply in the production and distribution chain, as value is added.
Companies are expected to register for VAT in the UAE when they meet certain requirements, and must calculate VAT due, report their liabilities, and pay the required tax.
The UAE’s Federal Tax Authority (FTA) was established under Federal Decree Law No. (13) of 2016. The FTA is responsible for administering, collecting, and enforcing federal tax laws in the UAE, including VAT and excise tax.
As part of its role in administering VAT, the FTA provides "streamlined, user-friendly digital services." Specifically, businesses can:
- Register for VAT online.
- File tax returns online.
- Request VAT refunds online.
- Access tax records digitally.
VAT Rates in the UAE
Within the UAE, the standard VAT rate on most goods and services is 5%. However, there are some zero-rated goods and some exempt goods.
Zero-rated supplies are taxed at 0%. Because they're VAT taxable, zero-rated supplies count toward your taxable turnover for registration threshold purposes. The good news is that with zero-rated supplies, businesses can reclaim input VAT but do not have to charge output tax.
Exempt goods and services aren't subject to VAT at all. No VAT is charged on the sale, and input VAT related to exempt activities cannot be recovered. Businesses that deal only in exempt supplies aren't required to register for VAT. Unfortunately, input VAT can't be reclaimed. This means your company effectively bears the cost of any VAT charged on goods or services that are purchased for exempt activities.
Examples of exempt goods and services include sales of plots (bare land), local bus services, and insurance services.
Examples of zero-rated supplies include exports outside GCC countries (subject to export conditions), international air cargo, the supply of specific educational services (approved private schools), and public hospital services.
Who Must Register for VAT
A business must register for VAT in the UAE if:
- It is based in the UAE, and its taxable supplies and imports exceed AED (United Arab Emirates dirham) 375,000 during a rolling 12-month period. VAT registration is also optional for UAE businesses with supplies and imports above AED 187,500.
- It is not based in the UAE but makes any taxable sales in the UAE, and there's no other person obligated to pay tax due on the supplies in the UAE. Registration is required regardless of the value of the taxable sales, so non-UAE companies selling within the UAE must register right away.
How to register
After creating an account, businesses can register for VAT through the FTA website’s eServices section. You must register within 30 days of meeting the registration threshold.
You'll need to gather certain documents to register, including:
- Your company's contact information, including the physical address of the office.
- Your trade license.
- Signed copies of your passport or the Emirates IDs of authorized signatories (along with proof of authorization for the signatories, if applicable).
- Any applicable partnership agreements or articles.
- Your Memorandum of Association (MOA), this is required if you are registering a company, as it outlines its structure and the titles and duties of company members
- Your bank details.
- A yearly turnover report.
- Customs information if your business is involved in importing or exporting.
If you fail to register as required, you will face a VAT penalty. You must also pay VAT for all taxable supplies and imports that were made since the time you were required to register. These payments are due retroactively from the date registration was required.
VAT return filing and payment
Your business must remit the tax that it collects from its customers to the government. At the same time, it can also request that the government refund tax paid to suppliers.
Once you have registered for VAT in the UAE, you are required to file your VAT return and make related VAT payments within 28 days from the end of your tax period. The FTA typically assigns quarterly filing periods to businesses with turnover below AED 150 million and monthly periods above that threshold.
The FTA also has the discretion to assign different tax periods for different business types.
You are required to file your tax return electronically through EmaraTax, which is the FTA portal.
After signing into your portal with your registered username and password, visit the VAT tab on the navigation bar and open VAT201- VAT Returns. Click on VAT201 – New VAT Return to open and complete the form you need. You'll need to provide:
- Details of the taxable person (this should already be filled out; confirm it is correct).
- The VAT return period (this should also be already filled out).
- The amount due on sales and all other outputs. Make sure the amount is in AED and round to two decimal places.
- Include any reductions in value if there were any credit notes issued or errors made during prior reporting periods.
- The VAT amount due.
- Adjustments required to output tax.
You may also need to include details on things like the value of standard-rated supplies, zero-rated supplies, and goods imported into the UAE; adjustments to imported goods; tax refunds provided to tourists; and supplies subject to reverse charge provisions. The Federal Tax Authority provides a complete guide to each box you must complete.
Payment deadlines
As mentioned above, after you’ve registered for VAT, you must file your VAT return and remit required payments within 28 days of the end of your tax period.
If you are late in filing or in making a payment, you will be subject to penalties. These penalties have been updated and revised by UAE Cabinet Decision No. 129 of 2025, with the new penalties effective April 2026. Penalties include:
- AED 1,000 for the first time you are late in submitting a VAT return.
- AED 2,000 for repeated late VAT filings within 24 months.
- Late payment penalties accrue at 14% per annum, calculated monthly from the day after the due date until payment is made.
If you make a mistake and fail to comply with obligations, you can submit a Voluntary Disclosure Form (VDF) 211 to qualify for reduced penalties.
Invoicing and documentation requirements
VAT invoices are required in the UAE, with a full tax invoice required when a VAT-registered buyer pays at least AED 10,000 for the supply of goods or services. Tax invoices must contain:
- The name, TRN, and address of the supplier and recipient.
- A unique identifying number.
- The date of the invoice and the date of supply, if that date differs from the invoice date.
- A description of the goods or services.
- The unit price, supplied quantity, amount payable, and tax rate.
- Any applicable discounts.
- The gross value payable.
- The VAT amount payable.
- The reverse charge declaration, if it applies.
Simplified tax invoices are allowed if the recipient isn't registered for UAE VAT, or if the recipient is VAT-registered, but the consideration for the supply is below AED 10,000.
Simplified invoices need the words "tax invoice" displayed prominently; the name, contact details, and TRN of the supplier; the invoice date; a description of the goods and services; and both the total amount payable and total VAT payable.
The UAE passed an e-invoicing mandate in Ministerial Decisions 243 & 244 of 2025. The mandate requires a phased-in roll-out of e-invoicing. The deadline for adoption varies, based on the size of the company and whether the transaction is a B2B (business to business), B2G (business to government), or B2C (business to consumer) transaction (with e-invoicing not required for B2C transactions under the current rules).
The voluntary phase begins in July 2026, and the mandatory phase begins in 2027.
Electronic invoicing requirements apply to all taxable persons and businesses, regardless of their VAT registration status. Invoices must be prepared by a UAE Ministry of Finance–accredited service provider and must follow a specific required format.
E-invoices will function as official VAT invoices once they are required. They will need to contain all of the information currently required on VAT invoices.
Recordkeeping requirements
You're required to maintain certain accounts and bookkeeping records when you are a taxable person under VAT in the UAE. These include:
- A record of outward supplies.
- Tax invoices related to the supply of goods or services, and a record of any adjustments to those invoices.
- A record of imported and exported goods or services.
- Tax credit notes.
- A record of goods or services that are used for non-business matters, which shows the taxes paid.
- A record of purchased goods and services that input VAT wasn't recovered for.
- Tax records showing tax due on taxable supplies, supplies where tax is paid under the reverse charge mechanisms, tax due after errors were corrected, and recoverable import tax.
Records must generally be maintained for five years (15 years for real estate transactions). Failure to comply with requirements to keep the proper VAT records of invoices can result in penalties totaling AED 10,000 for the first offense, and AED 20,000 for repeat offenses within 24 months.
UAE VAT law amendments effective Jan 1, 2026
VAT rules and other tax regulations have recently changed in the UAE. Specifically, Federal Decree-Law No. 17 of 2025 amended the Tax Procedures Law (TPL), and Federal Decree-Law No. 16 of 2025 amended the original VAT Law.
The amendments to the Tax Procedures Law are extensive and broad, impacting the refund process, credit balances, deadlines for audits, and voluntary disclosure requirements.
While Federal Decree-Law No. 16 of 2025 is narrower, the two laws work together. The VAT changes establish substantive tax rules, and the VAT Procedures Law governs how the rules are administered and enforced.
Some of the key VAT-specific rules that changed as a result of the amendments include:
Removal of self-invoicing requirement under the reverse charge mechanism: The reverse charge mechanism shifts the responsibility for VAT payment from the seller to the buyer. Under the previous reverse-charge rules, when a UAE business imported certain goods or services, the business was required to prepare a self-invoice to account for VAT. This is no longer required, although companies must still maintain supporting documentation and still must prepare invoices if nonresident suppliers don't provide them. This change eliminates the duplicated work of having to prepare a self-invoice in addition to the invoice already provided by the supplier.
New statute of limitations on excess recoverable VAT: Under the old rules, VAT credit balances could linger indefinitely. This is no longer the case. Taxpayers now have five years from the end of the relevant tax period to either apply their excess recoverable VAT against VAT liabilities or to file a refund claim. For companies with unclaimed credits that are more than five years old, there's a one-year transitional window to request a refund or apply for the credits.
Stricter rules on input VAT recovery: The FTA can now deny a deduction for input VAT if the supply is part of a chain that involves tax evasion and if the taxpayer knew, or reasonably should have known, that the transaction was linked to unlawful behavior.
Best practices for businesses
If you want to sell products or services in the UAE, you need to understand its VAT rules, including changes that went into effect in 2026. This means you should:
- Understand and comply with your registration requirements.
- Collect the appropriate tax due on taxable sales.
- Know how schemes like the reverse charge mechanism affect your obligation to collect VAT.
- Comply with all invoice requirements and, if you haven't already, prepare to make the shift to e-invoicing in the coming years.
- Track VAT credit age carefully to avoid losing credit balances.
- Vet suppliers carefully so you don't end up involved in a transaction linked to tax fraud.
- Maintain robust documentation for the required time.
- Explore software solutions like Numeral that take all of this off your plate.
Final thoughs
VAT rules in the UAE are evolving, and the penalties for non-compliance can be severe. You need to understand the 2026 changes and how they impact you, and you must make sure that you’re fulfilling all of your obligations.
Numeral can help. We make VAT compliance effortless in 70+ countries, including the UAE. With Numeral as your partner, you can expand your sales across the globe while spending as little as five minutes a month on your tax compliance.
