What is VAT in the UAE?
Value Added Tax (VAT) in the United Arab Emirates is a consumption tax levied on most goods and services supplied in the UAE. The standard rate is 5%, making it one of the lowest VAT rates in the world. VAT is administered by the Federal Tax Authority (FTA) and came into effect on 1 January 2018 under Federal Decree-Law No. 8 of 2017.
The UAE introduced VAT as part of a GCC-wide agreement to diversify government revenues away from oil. All six GCC states agreed to implement VAT, though timelines differed. Saudi Arabia and the UAE implemented it simultaneously on 1 January 2018. The UAE's 5% rate was deliberately kept low to minimise the impact on businesses and consumers while generating sustainable non-oil revenue.
VAT registration in the UAE
VAT registration in the UAE is managed through the FTA's EmaraTax portal (formerly known as the e-Services portal). Two thresholds apply:
- Mandatory registration: Annual taxable supplies or imports exceed AED 375,000
- Voluntary registration: Annual taxable supplies, imports, or relevant expenses exceed AED 187,500
Once registered, businesses receive a Tax Registration Number (TRN) and must issue tax invoices for all taxable supplies, file VAT returns quarterly (or monthly for larger businesses), and remit VAT to the FTA within 28 days of the end of each tax period.
Zero-rated supplies in the UAE
Zero-rated supplies attract 0% VAT. The supplier charges no VAT but can still claim input VAT on related purchases. UAE zero-rated supplies include:
- Exports of goods and services outside the UAE
- International transport of passengers and goods
- Supply and import of investment precious metals (gold, silver, platinum)
- Newly constructed residential buildings (first supply only)
- Certain healthcare services — preventive and basic healthcare
- Educational services for nurseries, pre-schools, and schools following the UAE curriculum
- Supply of crude oil and natural gas
VAT-exempt supplies in the UAE
Exempt supplies attract no VAT and businesses cannot recover input VAT on costs related to these supplies:
- Residential property rental (long-term leases)
- Bare land (undeveloped plots)
- Local passenger transport (buses, taxis, metro)
- Financial services (where the margin/fee is implicit — e.g. interest on loans)
Note: commercial property rental is standard-rated at 5%, not exempt. This is a common source of confusion for landlords and tenants in the UAE.
How to calculate 5% VAT in the UAE
To add VAT to a net (ex-VAT) price:
- VAT amount = Net price × 0.05
- Total (inc. VAT) = Net price × 1.05
- Example: AED 2,000 (ex. VAT) → Total = AED 2,000 × 1.05 = AED 2,100. VAT = AED 100.
To remove VAT from a gross (VAT-inclusive) price:
- Net price = Gross price ÷ 1.05
- VAT amount = Gross price − Net price
- Example: AED 5,250 (inc. VAT) → Net = AED 5,250 ÷ 1.05 = AED 5,000. VAT = AED 250.
Use the UAE VAT calculator above to perform these calculations instantly for any amount. You can also use the free invoice generator to create VAT-compliant invoices with the 5% UAE rate applied automatically.
Do I need to show VAT on invoices in the UAE?
Yes — VAT-registered businesses in the UAE must issue tax invoices for all standard-rated supplies. A compliant UAE tax invoice must include:
- The words "Tax Invoice" prominently displayed
- The supplier's name, address, and Tax Registration Number (TRN)
- The customer's name and TRN (for B2B supplies over AED 10,000)
- Invoice date and a unique sequential invoice number
- Description of goods or services supplied
- Unit price, quantity, and net amount for each line item
- VAT rate applied (5%) and the VAT amount in AED
- Total amount payable including VAT
For supplies under AED 10,000, a simplified tax invoice is permitted, which requires fewer fields. Need to create a professional invoice? Use the Criply Invoice Generator — free, no signup, download as PDF.