UAE VAT Registration & Filing

Mandatory VAT registration is required when taxable supplies exceed AED 375,000 in the past 12 months or are expected to exceed this in the next 30 days. Voluntary registration is available for businesses with taxable supplies between AED 187,500 and AED 375,000. Businesses below AED 187,500 cannot register for VAT.

The standard VAT rate is 5% on most goods and services. Zero-rated supplies (0% VAT but can recover input tax) include exports, international transportation, certain education and healthcare services. Exempt supplies (no VAT, cannot recover input tax) include residential property, local passenger transport, and bare land.

Most businesses file quarterly VAT returns within 28 days after the end of each tax period (quarter). Monthly filing is required if annual turnover exceeds AED 150 million. The first tax period starts from the effective date of registration. Late filing incurs penalties starting at AED 1,000.

Yes, registered businesses can recover input VAT paid on business-related purchases and expenses through the VAT return. Conditions: you must be VAT registered, have a valid tax invoice, and use the goods/services for taxable business activities. Input tax on exempt supplies and certain blocked expenses (e.g., entertainment) cannot be recovered.

Free zones are designated zones for VAT purposes. Supply of goods within the same designated zone is zero-rated (0% VAT). Import of goods into a designated zone from outside UAE is suspended (VAT paid when goods leave the zone). Services to free zone businesses follow normal VAT rules based on place of supply.

Penalties include: AED 10,000 for failure to register within 60 days; AED 1,000-10,000 for late filing (increases with delay); AED 1,000-15,000 for failure to maintain records; 2-5% of tax amount for late payment; up to 300% of tax amount for tax evasion; AED 2,500-15,000 for incorrect invoicing. Voluntary disclosure reduces penalties.

Reverse charge applies when you receive services from a supplier not registered for UAE VAT (typically foreign suppliers). The recipient (you) must account for both output and input VAT on the same return - effectively self-assessing VAT. Common for imported services like consulting, digital services, and professional fees from abroad.

VAT refunds occur when input tax exceeds output tax in a period. The excess is carried forward to the next return or refunded if balance exceeds AED 10,000. Refund applications are processed within 20 business days for standard cases. Special schemes exist for tourists (Tax Refund Scheme at airports) and foreign businesses under specific conditions.