UAE VAT in plain English

The 30-second version

Value Added Tax (VAT) is a 5% consumption tax on most goods and services sold in the UAE. If your business sells more than AED 375,000 of taxable supplies per year, you must register and start charging 5% VAT on your invoices. Every quarter (or month, for larger businesses) you submit a return — Form 201 — to the Federal Tax Authority (FTA) showing what you collected, what you paid, and what you owe.

The trap most owners fall into: thinking VAT is your money. It isn't. The 5% you collect from customers belongs to the FTA from day one — you're holding it on their behalf until you file Form 201.

What counts as a "taxable supply"?

Almost everything you sell, with three notable categories that behave differently:

• Standard-rated (5%) — the default. Most goods, services, and rentals.
• Zero-rated (0%) — exports outside the GCC, international transport, certain healthcare and education. You charge 0% but still report it on Form 201.
• Exempt — residential rent, certain financial services, local passenger transport. You do not charge VAT, and you cannot claim back VAT on related purchases.

The AED 375,000 threshold

This is the single most-asked question we hear:

• Below AED 187,500/year in taxable supplies → you cannot register, even if you want to.
• AED 187,500 – AED 375,000/year → voluntary registration. You can register if you want to claim input VAT back on your costs.
• Above AED 375,000/year → mandatory registration within 30 days of crossing the threshold. Missing this triggers a penalty.

The threshold is rolling — the FTA looks at the last 12 months at any point in time, not the calendar year. If you cross AED 375,000 in any rolling 12-month window, register.

What happens if you ignore it?

Penalties under Federal Decree-Law No. 8 of 2017 (UAE VAT Law) and Cabinet Decision No. 49 of 2021:

The records you have to keep

Under Federal Decree-Law No. 28 of 2022, Article 78, every UAE business must retain VAT-relevant records — invoices, receipts, customs documents — for five years from the end of the tax period they relate to (longer for real-estate-related records). This applies whether you keep them on paper or digitally. The FTA can ask for any of them at any time during an audit.

This is the requirement that makes a tool like ScanVAT actually useful: photographing every invoice and keeping a structured archive turns a shoebox-of-receipts problem into a search-and-export problem.

What about the new e-invoicing mandate?

That's a separate (newer) layer. Starting 1 January 2027 for large businesses (revenue ≥ AED 50M) and 1 July 2027 for everyone else, electronic invoices must be transmitted through an MoF-accredited Accredited Service Provider (ASP) in PINT-AE format over the Peppol network. We cover that in detail in our PINT-AE guide.

What to do this week

1. Check whether you've crossed AED 375,000 in trailing 12-month revenue. If yes and you're not registered, register on eservices.tax.gov.ae within 30 days.
2. Save every supplier invoice you receive — physically or digitally. The 5-year clock is already running.
3. Pick a tool (or a paper system) for tracking what you collected vs what you paid. The gap is what you owe.

Sources

• Federal Decree-Law No. 8 of 2017 on Value Added Tax
• Federal Decree-Law No. 28 of 2022 on Tax Procedures, Article 78
• Cabinet Decision No. 49 of 2021 on the violations and administrative penalties
• FTA e-services portal: tax.gov.ae