Question 1

What is the current VAT rate in UAE?

Accepted Answer

The UAE applies a standard VAT rate of 5% on most goods and services. This rate was introduced on 1 January 2018 and applies uniformly across all seven emirates. Certain supplies are zero-rated (e.g., exports, international transport) or exempt (e.g., residential property, some financial services).

Question 2

How do I calculate VAT on a price that already includes VAT?

Accepted Answer

To extract VAT from a VAT-inclusive price, divide the total by 1.05. The result is the net amount. Subtract the net from the total to get the VAT. For example, if the total is AED 1,050, the net is AED 1,050 / 1.05 = AED 1,000, and VAT = AED 50.

Question 3

Do I need to register for VAT in UAE?

Accepted Answer

VAT registration is mandatory for businesses with taxable supplies and imports exceeding AED 375,000 per year. Voluntary registration is available for businesses exceeding AED 187,500. Businesses below these thresholds are not required to register but may choose to do so.

Question 4

Can I claim VAT input credits on business expenses?

Accepted Answer

Yes, registered businesses can recover VAT paid on business expenses (input VAT) by deducting it from VAT collected on sales (output VAT). Input VAT recovery is subject to certain conditions — the expense must be for making taxable supplies and proper tax invoices must be retained.

Question 5

Which goods and services are VAT-exempt in UAE?

Accepted Answer

Key exemptions include residential property (first sale by developer is zero-rated; resale and rental are exempt), certain financial services, bare land, and local passenger transport. Healthcare and education are zero-rated when provided by government or government-funded entities.

Question 6

How often do businesses file VAT returns in UAE?

Accepted Answer

Most businesses file quarterly VAT returns through the Federal Tax Authority (FTA) portal. Large businesses with annual revenue above AED 150 million may be required to file monthly. Returns are due within 28 days after the end of each tax period.

Question 7

What are the penalties for late VAT filing in UAE?

Accepted Answer

Late filing attracts a penalty of AED 1,000 for the first offence and AED 2,000 for repeat offences within 24 months. Late payment of VAT due incurs a 2% penalty immediately, plus 4% on the 7th day, and 1% daily thereafter up to a maximum of 300% of the unpaid amount.

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