VAT Services in Dubai 2025
The UAE is leading among the best places in the world to start a business. Everything that an investor or business owner considers before establishing a business setup in a foreign location is present here. It attracts huge foreign investment every year with investor-friendly policies, a prime location, and a stable economy. However, to run a company without any issues, business owners need to understand VAT in UAE. The VAT system was introduced in the country in 2018. Today, it has become mandatory for every business, from a startup to a large company, to understand its rules. This is applied to almost all goods, and businesses must maintain compliance with its guidelines to avoid penalties. Start Any Business (SAB) can help you with everything, from VAT registration to filing and maintaining good financial health. With us on your side, you only need to focus on growing your business.
What is VAT in UAE?
As we discussed above, UAE VAT was introduced in 2018, at a standard rate of 5%. This applies to most goods and services sold within the country. If a business’s yearly taxable sales are more than AED 375,000, it needs to register for VAT with the FTA. Besides registration, a VAT-registered business has to issue VAT-compliant invoices and file returns regularly on time. Businesses collect this indirect tax on behalf of the government. This tax is charged at each stage of production and sale. However, the final cost is paid by the consumer. Businesses can claim back the VAT paid on their expenses. To claim back their input VAT, they need to adjust the output VAT, which is the VAT they collect. Suppliers from some specific sectors, like healthcare, exports, and education, are either 0% or exempt from this indirect tax.
How VAT Works in UAE?
The UAE VAT system works like a chain. Businesses registered with FTA for VAT charge this indirect tax at each step of buying and selling what they sell (output tax). They need to pay VAT on what they buy (input tax). Then they need to pay the difference to the government. They can also get a refund if they paid more VAT on their purchases than they collected on sales.
Let’s understand how this works with an example. Suppose a technology supplier sells software to a local distributor. The supplier charges VAT on its service and pays it to the government. The distributor then sells the software packages to a retail company. The distributor will again charge VAT and claim back the VAT it paid to the supplier. When the retail company sells the software to end users, it will also charge VAT and claim back the VAT it paid to the distributor. This system makes sure that this indirect tax is not charged twice, and the final consumer actually pays the VAT.
VAT Rate in UAE
In the Emirates, the VAT is mainly divided into three main types. The main difference among them is the ability for businesses to reclaim the tax they paid on business purchases, which is allowed for standard-rate and 0-rated supplies. However, this benefit is not available for exempt supplies.
Standard-Rated Supplies (5%)
This rate applies to most goods and services supplied in the Emirates. This category includes everything that is not specially mentioned as zero-rated or exempt. This includes:
- Retail sales of goods
- Hotel stays & restaurant meals
- Construction services
- Imported items & services
- Entertainment & leisure activities
- Professional services
Zero-Rated Supplies (0%)
These supplies fall under the category of taxable goods and services but have a VAT rate of 0%. Businesses that provide these supplies can reclaim the tax they paid on their purchase. This includes:
- Exports: Goods and services that are sold to countries outside the GCC.
- International Transport: Services for passengers and goods that start, end, or even pass through the UAE.
- Precious Metals: Supply of investment-grade gold, silver, and platinum (99% pure or higher) is also zero-rated.
- Real Estate: The first supply of a new residential building within three years of its completion is zero-rated. After this, all other sales are free from VAT charges.
- Education: Certain educational services and related goods supplied by qualifying institutions.
- Healthcare: Medicines, medical equipment, preventive and curative healthcare services offered by qualifying medical professionals and institutions.
Exempt Supplies
- Certain Financial Services: This applies to financial services where there is no direct charge, like interest on a loan.
- Residential Properties: As we discussed above, following the initial sale, all sales and leases of residential buildings are free from VAT charges.
- Bare Land: The sale and lease of land with undeveloped buildings are also exempt.
- Local Passenger Transport: Local passenger transport services via land, water, or air are free from VAT charges.
Understanding VAT Calculation in the UAE
Let’s understand how VAT is calculated in UAE with an example. Suppose a Dubai-based online electronic store buys smartphones from a local distributor for AED 100,000. For this purchase, the store needs to pay AED 5,000 VAT (5%). Then the store sells those phones to its customers for AED 120,000. It charges AED 6,000 VAT. The store owner will keep the AED 1,000 difference and pay that to the FTA. This makes it clear that VAT is collected at every stage, but finally it is paid by the end consumer.
VAT Compliance & Obligations in UAE
Businesses operating in any sector within the UAE must comply with the required VAT rules if their annual taxable turnover is above the mandatory registration limit. With Start Any Business (SAB), you never have to worry about compliance issues, as our team knows all VAT obligations. We keep our clients protected from all legal worries and penalties by ensuring their businesses comply with the necessary VAT guidelines.
VAT Registration in UAE
As we discussed above, for businesses with yearly taxable sales surpassing AED 375,000, FTA registration for VAT is mandatory. Once their sales cross the eligibility limit, they need to apply for registration within 30 days beginning when the limit was reached. However, if they fail to register on time, they need to pay a hefty penalty of AED 10,000. With Start Any Business (SAB), you secure VAT registration without any hassles.
Moreover, businesses with yearly taxable supplies surpassing AED 187,500 but less than AED 375,000 can also register with VAT for FTA. With voluntary registration, businesses become eligible to claim back the VAT they paid on their purchases and expenses. Also, this registration improves their credible image in the market.
Invoice Generation & Payment Collection
All the businesses in the UAE making taxable supplies of goods and services must issue tax-compliant invoices. For the buyers, these are important for recovering the input tax. Moreover, these are also necessary for the sellers to maintain an official audit record for the VAT they charged.
- VAT-registered businesses need to use a full tax invoice for B2B sales or when the amount is above AED 10,000.
- VAT-registered businesses must use a simplified tax invoice for B2C sales or when the amount is below AED 10,000.
- Every tax invoice for a taxable supply must include specific details, like the tax invoice label, details of the seller and recipient, TRN, a unique invoice number, issuance date, supply date, details about goods and services, and the amount of VAT charged.
- You need to issue the VAT invoices within 14 days of making the supply. Moreover, make sure to charge 5% on all taxable supplies.
VAT Return Filing
All businesses registered with the FTA for UAE VAT need to file their tax returns regularly using the EmaraTax portal. The annual turnover of a business determines its filing frequency.
- Monthly: Businesses that are earning more than AED 150 million must file returns monthly.
- Quarterly: Businesses with earnings less than AED 150 million file their returns quarterly.
- Standard-rated supplies
- Zero-rated supplies
- Exempt supplies
- Imports that fall under the reverse charge mechanism
- Corrections or adjustments to previously filed returns
VAT Payment (Remittance to the Government)
- If the calculated output VAT is more than the input VAT, the business must pay the difference to the FTA.
- All payments related to VAT must be made to the FTA through its e-Services portal, using credit card, local bank transfer, and other options.
- Both late and incorrect payments can lead to serious penalties.
Record-Keeping Obligations
- All tax invoices and credit notes that they have issued and received.
- Details of all supplies and imports of goods and services.
- Records of goods and services used for personal or non-business purposes.
- Records of purchases for which input tax was not claimed.
- Records of all goods and services they have exported.
- Any changes made to their accounts or tax invoices.
- Details of the tax accounting frameworks used.
How Businesses Can Recover VAT in the UAE
Recovering input VAT is a main feature of this indirect tax system. All registered businesses need to understand how they can balance the VAT they owe on their sales with the VAT they paid on their business-related purchases.
VAT Rules for Global Business Deals
- Export goods are zero-rated if shipped outside the GCC. However, you need to provide documentation for export.
- Exported services are mostly zero-rated if the benefit is received outside the UAE. This simply means these services must not be linked with any UAE property or event.
- 5% VAT applies to imported goods. Registered businesses pay this through RCM, while non-registered businesses pay customs but can’t reclaim it.
- Imported services are subject to a 5% reverse charge VAT. All input VAT can only be recovered by fully taxable businesses.
- Trade between GCC countries is treated as a zero-rated export from the UAE. Here VAT is paid by the importer in the destination country.
- If international transport services are part of one complete international journey, they are treated as zero-rated.
- Foreign digital service providers need to register for UAE VAT and charge it on B2C sales.
Penalties for Non-Compliance
VAT-registered businesses in the UAE must follow the required compliance obligations. From late tax payments to late registration, the tax authority fines for various non-compliance mistakes.
- Late Registration: Businesses that don’t register with FTA for VAT after their taxable sales reach the eligibility limit within 30 days face a penalty of AED 10,000.
- Late Filing of a Tax Return: If you fail to submit a VAT return on time, you will face an AED 1,000 penalty for the first offense. However, for repeated offenses within 24 months, AED 2,000 must be paid as a penalty fee.
- Late Deregistration: You must submit a deregistration application to the FTA to avoid penalties, which can be AED 1,000 per month and can lead to a bigger penalty of AED 10,000.
- Record-Keeping Failure: You can face a penalty of AED 10,000 for not maintaining the necessary records for the first offense. However, this penalty fee can increase up to AED 50,000 for each repeated violation.
- Late Payment of VAT: 2% of the unpaid tax is due immediately, 4% is due seven days after the payment deadline, and there is a 1% daily penalty on any remaining unpaid tax, with a maximum cap of 300%.
Choose Start Any Business for VAT Services in Dubai
Make handling VAT registration, deregistration, and other compliance tasks easier for you with Start Any Business (SAB). We are the leading VAT consultants in Dubai and offer complete and customized VAT solutions for businesses of all sizes. Our team stays updated with all changes in tax and VAT laws. So, you can stay assured that your business is always compliant with the latest guidelines. We have been simplifying the entire VAT process for our clients from diverse sectors for years. Whether you need support for VAT refund processing, e-invoicing implementation, or return filing, we can help with anything. Make us your reliable partner and get the right solutions for all your business’s VAT needs.
Frequently Asked Questions On VAT Services in Dubai, UAE
List of goods and services are exempt from VAT in Dubai that are:
- Education & Training
- Oil & Gas
- Transportation
- Healthcare
- Real Estate
- Financial Service
To claim a VAT refund, applicants are required to submit a refund form to the Federal Tax Authority (FTA) via email along with supporting documents.
To calculate VAT, you need to follow these things :
- Determine the net price (VAT exclusive price)
- Find out the VAT rate
- For calculate the VAT price: first, multiply the net amount by VAT rate
- Determine the gross amount: multiply the net price by the VAT rate, and then.
- Add this to the VAT exclusive amount so you receive the VAT inclusive
Yes, VAT registration in mandatory in the UAE. When you are expecting to supply goods or services in UAE or arrange for VAT, you are required to register after the VAT law comes into force and there is no other person in UAE due to VAT on your behalf.
The three types of VAT are :
- Consumption
- Income kind
- Gross National products
Yes, VAT registration in mandatory in the UAE. When you are expecting to supply goods or services in UAE or arrange for VAT, you are required to register after the VAT law comes into force and there is no other person in UAE due to VAT on your behalf.
Once your trade is registered in VAT. When your business income reaches the VAT registration limit. Then charge VAT on services.
Areas that are exempted from VAT in the UAE are:
- Supply of some financial services
- Residential properties-sale and lease.
- Bare land-sale and lease.
- Local passenger transport.
Since the location of supply of goods generally follows the place of goods, the supply of goods to the designated zone is carried out outside the United Arab Emirates. It means that default supplies that such supplies are not subject to UAE VAT.
