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FORMENZO GUIDES · UAE FREE-ZONE FORMATION

UAE VAT 5% — what founders need to know in 2026

AED 375,000 mandatory registration threshold, AED 187,500 voluntary, zero-rated vs exempt supplies, FTA EmaraTax filing, and how VAT differs from UAE Corporate Tax. Anchored to Federal Decree-Law No. 8 of 2017.

Last updated: Reviewed by · UAE-resident team · DubaiWorkbook-verified against authority pricing

Key topics on this page

  • UAE VAT
  • UAE VAT 5%
  • UAE VAT registration
  • FTA EmaraTax VAT
  • AED 375000 VAT threshold

Frequently asked questions

What is the standard rate of UAE VAT?

The standard rate of UAE VAT is 5%, set by Federal Decree-Law No. 8 of 2017 on Value Added Tax. It has been in force since 1 January 2018 and applies to most taxable supplies of goods and services in the UAE.

When is VAT registration mandatory?

A UAE-resident business must register for VAT when the value of its taxable supplies and imports exceeds AED 375,000 in the previous twelve months, or where it expects to exceed that figure in the next thirty days. Once you cross the threshold, you have thirty days to submit the application through EmaraTax.

What is the voluntary registration threshold?

A UAE business may choose to register for VAT once its taxable supplies, imports, or taxable expenses exceed AED 187,500 in the previous twelve months, or where it expects them to exceed that figure in the next thirty days. Voluntary registration unlocks the ability to recover input VAT but also takes on the full compliance burden.

What is the difference between zero-rated and exempt supplies?

Zero-rated supplies are taxable at 0% and allow the supplier to recover related input VAT; examples include qualifying exports, international transport, and certain healthcare and education. Exempt supplies are outside the VAT system, so the supplier does not charge VAT and cannot recover related input VAT; examples include bare land, certain financial services, and ongoing residential rent.

Does VAT apply inside UAE free zones?

Yes. UAE free zones are inside the UAE for VAT by default. A narrow subset of free zones are categorised as Designated Zones by Cabinet Decision — inside a Designated Zone, supplies of goods (not services) can sit outside the scope of UAE VAT under specific conditions, but services performed inside a Designated Zone are still treated as performed in the UAE.

How often do I file VAT returns?

Most newly-registered businesses are assigned a quarterly VAT tax period. Larger businesses or those flagged by the FTA may be assigned monthly periods. The return is filed through EmaraTax within twenty-eight days of the end of each tax period, and any net VAT due is paid by the same deadline.

Is VAT the same as Corporate Tax in the UAE?

No. VAT is a 5% consumption tax under Federal Decree-Law No. 8 of 2017, levied on the value added at each stage of supply. UAE Corporate Tax is a profit tax under Federal Decree-Law No. 47 of 2022, with a 9% standard rate above AED 375,000 of taxable income. They are administered through the same EmaraTax portal but are independent taxes with different bases, rates, and return cycles.

What is reverse charge?

Reverse charge shifts the obligation to account for VAT from the supplier to the recipient. It commonly applies to imports of services from foreign suppliers and to imports of goods in specific circumstances. The UAE recipient records both an output and an input entry on the same VAT return, so the net cash impact for a fully recoverable input is nil.

Can related UAE companies form a single VAT registration?

Two or more related UAE-resident persons that meet the control and financial tests set in the Decree-Law may apply to form a tax group for VAT. The group has a single TRN, files a single combined return, and intra-group supplies are ignored. The application is made to the Federal Tax Authority through EmaraTax.

What happens if I file or pay VAT late?

The FTA publishes a schedule of administrative penalties for late registration, late filing, late payment, incorrect returns, missing tax invoices, and missing records. The exact AED values sit in Cabinet Decisions on administrative penalties and can change. Check tax.gov.ae for the current schedule, or work with a UAE tax adviser.

How long should I keep my VAT records?

Tax invoices issued and received, supporting contracts, place-of-supply analyses, evidence for zero-rating, partial-exemption workings, and copies of every filed return should be retained for at least five years, with longer periods for specific categories such as capital assets and real estate. Digital storage is acceptable provided records are accessible at the FTA's request.

Does Formenzo register VAT or file returns for me?

No. Formenzo is an aggregator and comparison platform. We surface AED prices from uploaded zone workbooks, run a bank-readiness signal, and generate a document checklist that flags VAT registration at the right step. We do not register your VAT, file your returns, or provide tax advice. Work with a UAE-licensed tax adviser or accountant for the compliance itself.

Sources cited

Citations are to public UAE law and authority publications. Formenzo's own pages are not authoritative on the law itself — read the cited source for the operative text.

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