01The thresholds
VAT in the UAE is charged at 5%. Registration becomes mandatory when taxable supplies and imports in the previous twelve months exceeded AED 375,000, or are expected to exceed it in the next thirty days. A business may register voluntarily once taxable supplies or expenses pass AED 187,500, which is often worth doing early so that VAT on setup costs can be recovered.
02After registration
A registered business charges VAT on its invoices, which must show the tax registration number, and files a return, normally every quarter, within 28 days of the end of the period. The net of VAT charged and VAT paid on purchases is paid to the Federal Tax Authority with the return.
Exports of goods and most services supplied to customers outside the GCC are zero-rated, so a free zone consultancy selling only to foreign clients may be registered with little or no VAT to pay, but still has to file.
03Common mistakes
- Registering late: the penalty is AED 10,000
- Treating a designated zone as outside VAT for services (only goods benefit)
- Invoices without the TRN or the VAT amount shown
- Claiming input VAT on entertainment and on cars available for private use, which is blocked