Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. The rate of VAT is 5 per cent.

VAT will provide the UAE with a new source of income which will be continued to be utilised to
provide high-quality public services. It will also help government move towards its vision of reducing
dependence on oil and other hydrocarbons as a source of revenue.
Implication of VAT on individuals
VAT, as a general consumption tax, will apply to the majority of transactions in goods and services. A
limited number of exemptions may be granted.
As a result, the cost of living is likely to increase slightly, but this will vary depending on an
individual's lifestyle and spending behaviour. If an individual spends mainly on those things which are
relieved from VAT, he is unlikely to see any significant increase.
The government will include rules that require businesses to be clear about how much VAT an
individual is required to pay for each transaction. Based on this information, individuals can decide
whether to buy something.
Implication of VAT on businesses
Businesses will be responsible for carefully documenting their business income, costs and associated
VAT charges.
Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and
incur VAT on goods/services that they buy from suppliers. The difference between these sums is
reclaimed or paid to the government.

VAT-registered businesses generally:

• must charge VAT on taxable goods or services they supply

• may reclaim any VAT they have paid on business-related goods or services
• keep a range of business records which will allow the government to check that they have got
things right.
VAT-registered businesses must report the amount of VAT they have charged and the amount of VAT
they have paid to the government on a regular basis. It will be a formal submission and reporting will
be done online.
If they have charged more VAT than they have paid, they have to pay the difference to the
government. If they have paid more VAT than they have charged, they can reclaim the difference.
VAT in GCC
The UAE coordinates VAT implementation with other GCC countries because she is connected with
them through 'The Economic Agreement between the GCC States' and 'The GCC Customs Union'.
Read Common VAT Agreement of the States of the Gulf Cooperation Council (GCC).
Read more about VAT on the websites of:

• Federal Tax Authority

• Ministry of Finance.

VAT guidelines:

• Registration user guide - warehouse keepers and designated zones

• Registration user guide – VAT
• Registration user guide – tax groups
• Getting started guide - VAT
• Getting started guide - tax groups
• VAT treatment for selected sectors (PDF, 218 KB)
• VAT for businesses (PDF, 2.6 MB)
• VAT for education (PDF, 1.81 MB)
• VAT for retailers (PDF, 6.09 MB)
• Guidance on zero-rated and exempt supplies (PDF, 1.44 MB)
• 10 things you need to know about VAT (PDF, 1.64 MB)
• VAT treatment of properties (PDF, 2.63 MB)
• VAT treatment for imported goods (PDF, 336 KB)
• Know your rights - Tax invoice (PDF, 402 MB)
• Know your rights – Education (PDF, 140 KB)
• Know your rights – Healthcare services (PDF, 139 KB)

Useful links:

• Federal decree-law No. (8) of 2017 on value added tax

• UAE Cabinet Decision (52) of 2017 on the executive regulations of the Federal Decree Law No.
(8) of 2017 on Value Added Tax
• Explaining VAT – Federal Tax Authority
• Registering for VAT – Federal Tax Authority
• Federal law by decree No. 13 of 2016 concerning the establishment of the Federal Tax
Authority
• VAT FAQs - Federal Tax Authority

Criteria for registering for VAT

A business must register for VAT if its taxable supplies and imports exceeds AED 375,000 per annum.
It is optional for businesses whose supplies and imports exceed AED 187,500 per annum.

A business house pays the government the tax that it collects from the customers, but at the same time
it receives a refund from the government on tax that it has paid to its suppliers.

Foreign businesses may also recover the VAT they incur when visiting the UAE.

Read more on VAT:

• Mandatory and voluntary registration of VAT

• Federal Decree-Law No. 8 of 2017 on Value Added Tax
• Quick references to help you on VAT application

How to register for VAT?

Businesses can register for VAT through the e-services section on the FTA website. However, they
need to create an account first. For more details about VAT registration, please read VAT registration
User Guide.

For general inquiries about tax registration and/or application, you may contact Federal Tax
Authority through the enquiry form or send an email to info@tax.gov.ae. You can also call on 600 599
994 or 04-7775777.

How is VAT collected?

VAT-registered businesses collect the amount on behalf of the government; consumers bear the VAT
in the form of a 5 per cent increase in the cost of taxable goods and services they purchase in the UAE.

UAE imposes VAT on tax-registered businesses at a rate of 5 per cent on a taxable supply of goods or
services at each step of the supply chain.

Tourists in the UAE also pay VAT at the point of sale.

On which businesses does VAT apply?

VAT applies equally on tax-registered businesses managed on the UAE mainland and in the free zones.
However, if the UAE Cabinet defines a certain free zone as a ‘designated zone’, it must be treated as
outside the UAE for tax purposes. The transfer of goods between designated zones are tax-free.

• View list of ‘designated zones’ in the UAE.

Filing a tax return for VAT

At the end of each tax period, VAT registered businesses or the ‘taxable persons’ must submit a ‘VAT
return’ to Federal Tax Authority (FTA). A VAT return summarises the value of the supplies and
purchases a taxable person has made during the tax period, and shows the taxable person’s VAT
liability.

Liability of VAT
The liability of VAT is the difference between the output tax payable (VAT charged on supplies of
goods and services) for a given tax period and the input tax (VAT incurred on purchases) recoverable
for the same tax period.

Where the output tax exceeds the input tax amount, the difference must be paid to FTA. Where the
input tax exceeds the output tax, a taxable person will have the excess input tax recovered; he will be
entitled to set this off against subsequent payment due to FTA.

How to file VAT return?

You must file for tax return electronically through the FTA portal: eservices.tax.gov.ae. Before filing
the VAT return form on the portal, make sure you have met all tax returns requirements. The
following guideline shows you four steps to register a VAT return.

Useful links (all are PDFs):

• VAT return user guide

• Vat return summary user guide
• Special VAT refund user guide for business visitors only
• VAT return user guide summary
• VAT payment for commercial property buyers

• Federal Law No. 7 of 2017 on Tax Procedures

• Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. 7 of 2017 on
Tax Procedures.

When are businesses required to file VAT return?

Taxable businesses must file VAT returns with FTA on a regular basis and usually within 28 days of
the end of the ‘tax period’ as defined for each type of business. A ‘tax period’ is a specific period of time
for which the payable tax shall be calculated and paid. The standard tax period is:

• quarterly for businesses with an annual turnover below AED150 million

• monthly for businesses with an annual turnover of AED150 million or more.

The FTA may, at its choice, assign a different tax period for certain type of businesses.

Failure to file a tax return

Failure to file a tax return within the specified timeframe will make the violator liable for fines as per
the provisions of Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax
Laws in the UAE.
Updated on 04 Mar 2018