UAE VAT applies at 5% once your taxable turnover exceeds AED 375,000. We explain who needs to register, how to stay compliant, and the common mistakes businesses make in their first year.
VAT basics
UAE VAT was introduced in January 2018 at 5%. Mandatory registration applies when your taxable turnover exceeds AED 375,000 in the previous 12 months or is expected to in the next 30 days. Voluntary registration is available at AED 187,500. Most free zone companies supplying internationally are zero-rated (0% VAT on those supplies) but still need to register and file returns if they exceed the threshold.
Mandatory vs voluntary registration
If you're over the AED 375,000 threshold, registration is mandatory — failure to register on time carries penalties. Voluntary registration below the threshold makes sense if you have significant input VAT to recover (i.e., you're buying goods or services with UAE VAT and want to reclaim it). Many startups register voluntarily early to simplify their accounting and recover VAT on setup costs.
Filing returns
VAT returns in the UAE are filed quarterly through the Federal Tax Authority's EmaraTax portal. You need to maintain proper tax invoices for all taxable supplies, keep records for 5 years, and reconcile your returns to your accounting. Late filing penalties start at AED 1,000 for the first offence. Accurate bookkeeping from day one prevents painful reconciliation later.
Common mistakes
Classifying international supplies incorrectly (they should typically be zero-rated, not exempt), failing to issue proper tax invoices (must include TRN, date, line-item VAT), not registering in time, and mixing VAT from multiple entities. StrataLink's accounting team handles VAT registration, quarterly filing, and annual reconciliation for clients who prefer not to manage this in-house.
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