26/11/2025
✅ Business impact
Getting VAT right helps you price correctly, protect margins, manage cash flow and avoid unnecessary penalties.
✅Compliance
Correct registration, invoicing and record keeping are essential to stay on the right side of the Federal Tax Authority (FTA).
✅Tax planning
Understanding what is standard rated, zero rated or exempt can optimise VAT recovery and reduce costs over time.
10 VAT basics every UAE business should know
1️⃣ Standard rate is 5%
Most goods and services in the UAE are subject to 5% VAT.
2️⃣ In place since 1 January 2018
VAT was introduced under UAE Federal Decree Law No. 8 of 2017.
3️⃣ Registration thresholds
• Mandatory: taxable supplies above AED 375,000 per year.
• Voluntary: from AED 187,500 per year.
4️⃣ Input tax vs output tax
You pay VAT on purchases (input tax) and charge VAT on sales (output tax). Input tax can usually be offset against output tax, reducing what you pay to the FTA.
5️⃣ Zero rated vs exempt
• Zero rated: VAT at 0%, but you can still reclaim input VAT (for example, exports, qualifying international transport).
• Exempt: no VAT charged, but you cannot reclaim related input VAT (for example, certain financial services, local passenger transport).
6️⃣ VAT on imports
VAT also applies to imports, generally collected via customs when goods enter the UAE.
7️⃣ VAT returns and deadlines
Most businesses file quarterly, some monthly, depending on turnover and FTA profiling. Returns and payments are usually due 28 days after the end of the tax period.
8️⃣ Record keeping
VAT registered businesses must keep invoices, receipts and import or export documents for at least 5 years, ready for FTA inspection.
9️⃣ Penalties for non compliance
Late registration, late filing, late payment and poor records can all result in fines, with amounts escalating for repeated issues.
🔟 Designated Free Zones
Some Free Zones are designated zones with special VAT treatment. Certain transfers between them can be VAT free if specific conditions are met.
VAT in the UAE can be complex, but it does not need to be stressful.
At TAG Consultancy, our UAE team handles the full VAT lifecycle for you:
☑️ VAT registration and ongoing compliance
☑️ VAT return filing and reporting
☑️ VAT refunds and VAT accounting
☑️ VAT audits and VAT deregistration
☑️ Accounting, audit and support with FTA queries or reviews
TAG Consultancy is a firm you can trust to manage everything properly from day one, so you can stay focused on running your business.
If you are unsure whether you are handling VAT correctly, contact us to book a free 30 minute consultation with our team here: https://tagconsultancy.ae/contact-us