Value Added Tax has applied in the UAE since 1 January 2018. For most businesses it is now a routine part of operating, but it still requires attention to detail. Registration thresholds, invoice requirements and filing deadlines all need to be managed correctly.
This article explains the main points businesses should understand about UAE VAT registration and filing.
How UAE VAT works
VAT is charged at a standard rate of 5% on most goods and services supplied in the UAE. Some supplies are zero-rated, such as certain exports, and some are exempt, such as certain residential property and some financial services.
A VAT-registered business generally:
- Charges VAT on its taxable sales (output tax)
- Pays VAT on its business purchases (input tax)
- Reports both in a periodic VAT return
- Pays the difference to the Federal Tax Authority, or claims it back where input tax is higher
The distinction between zero-rated and exempt supplies matters. Zero-rated supplies usually still allow the business to recover related input tax, while exempt supplies generally do not.
When registration is required
Mandatory registration
A resident business must register for VAT if:
- The value of its taxable supplies and imports in the previous 12 months exceeded AED 375,000, or
- It expects the value of its taxable supplies and imports to exceed AED 375,000 in the next 30 days
Voluntary registration
A business that is below the mandatory threshold may choose to register if its taxable supplies and imports, or its taxable expenses, exceeded AED 187,500 in the previous 12 months, or are expected to exceed that amount in the next 30 days.
Voluntary registration can allow a business to recover input tax on start-up costs, but it also brings filing obligations. It is worth weighing both sides.
Non-resident businesses
The registration threshold does not apply in the same way to non-resident businesses. A foreign business making taxable supplies in the UAE may need to register regardless of value, where no one else is required to account for the VAT.
| Situation | Threshold |
|---|---|
| Mandatory registration (resident) | Above AED 375,000 |
| Voluntary registration | Above AED 187,500 |
| Non-resident making taxable supplies | Threshold may not apply |
How to register
Registration is completed online through the FTA’s EmaraTax platform. Businesses usually need:
- Trade licence and constitutional documents
- Passport and Emirates ID copies of owners and authorised signatories
- Bank account details
- Turnover figures and supporting evidence, such as sales invoices
- Details of expected imports and exports, and customs registration where relevant
Apply within the timeframe the FTA sets once you become required to register. Late registration can result in penalties.
Issuing tax invoices
Once registered, you must issue tax invoices that meet FTA requirements. A full tax invoice usually includes:
- The words “Tax Invoice” clearly shown
- Your name, address and Tax Registration Number (TRN)
- The customer’s details and TRN, where applicable
- A sequential invoice number and date of issue
- A description of the goods or services
- The amount payable, the VAT rate and the VAT amount in AED
Simplified invoices may be used in some circumstances. Getting invoice format right matters because input tax recovery for your customers depends on it.
Filing VAT returns
Tax periods
Most businesses file quarterly. Larger businesses may be assigned monthly tax periods. The FTA confirms your tax period on registration.
Deadline
The VAT return, and payment of any VAT due, must be submitted no later than the 28th day after the end of the tax period. For a quarter ending 31 March, that is usually 28 April.
What the return covers
The return reports:
- Standard-rated, zero-rated and exempt sales, broken down by emirate where required
- Supplies subject to the reverse charge
- Imports
- Input tax being recovered on purchases and expenses
A nil return is still required if you made no supplies during the period.
Common areas to watch
Many VAT errors are avoidable with good processes. Pay particular attention to:
- Input tax claims: only recover VAT on expenses that are for business purposes and supported by valid tax invoices.
- Blocked expenses: VAT on some items, such as certain entertainment costs, cannot be recovered.
- Reverse charge: imported services and some imported goods require you to account for VAT yourself.
- Place of supply: cross-border services need careful analysis.
- Corrections: errors above certain limits may require a voluntary disclosure rather than an adjustment in the next return.
Record keeping
VAT-registered businesses must keep records such as invoices, credit notes, import and export documents and accounting ledgers. VAT records are generally required to be kept for at least five years after the end of the tax period they relate to, with longer periods for some records, such as those relating to real estate.
Reliable bookkeeping makes VAT returns faster to prepare and easier to support if the FTA asks questions.
VAT compliance checklist
- Monitor turnover each month against the AED 375,000 and AED 187,500 thresholds
- Register on EmaraTax when required and keep details up to date
- Issue tax invoices that meet FTA requirements
- Classify each sale correctly as standard-rated, zero-rated or exempt
- Check each input tax claim against a valid tax invoice
- Account for reverse charge on relevant imports
- File and pay by the 28th day after each tax period ends
- Keep VAT records for at least the required retention period
How we can help
Scaleon’s UAE VAT service covers registration, return preparation and reviews of existing VAT processes. If you are unsure whether you need to register, or want a second look at your filings, contact us.