FAQ

The standard VAT rate in the UAE is 5%, applicable on most goods and services unless specifically zero-rated or exempt.

Businesses with taxable supplies or imports exceeding AED 375,000 in the past 12  months — or expected to exceed that threshold in the next 30 days — must register  for VAT. Businesses with turnover between AED 187,500 and AED 375,000 may register voluntarily.

• Zero-rated (0%) supplies are taxable, and the business can recover input  VAT (e.g., exports of goods, certain healthcare and educational services).
• Exempt supplies are not subject to VAT, and input VAT cannot be  recovered (e.g., certain financial services and residential rents).  

Key responsibilities include preparing and submitting the Prudential Returns (PIBs), monitoring capital adequacy, managing regulatory reporting, and ensuring financial statements comply with DFSA rules.

Yes, if the expenses are business-related and you hold valid tax invoices. Input VAT cannot be claimed for blocked items like entertainment costs, personal expenses, or motor vehicles not used exclusively for business.

The FTA imposes both fixed and percentage-based penalties for VAT violations:  

• Failure to register for VAT: AED 10,000

• Failure to file a VAT return:

1. AED 1,000 (first offense)
2. AED 2,000 (repeat offense within 24 months)  

• Failure to pay tax due by deadline:

1. 2% of the unpaid tax immediately
2. Additional 4% if unpaid within 7 days
3. 1% daily penalty (capped at 300%)  

• Incorrect VAT return or failure to disclose errors:  

1. Fixed penalty: AED 3,000 (first offense), AED 5,000 (repeat)
2. Percentage penalty: from 5% to 50% of the unpaid tax depending on  how the error was discovered and disclosed

Yes. Unless the free zone is listed as a “Designated Zone” and specific movement of goods/services criteria are met, VAT applies. Even in Designated Zones, services  are generally subject to VAT.

If you only make zero-rated exports, you still need to register if your turnover exceeds the threshold, but your VAT liability will generally be zero. You may still  claim input VAT.

Yes, if your taxable supplies fall below AED 187,500 over the past 12 months and are expected to remain below that level. Deregistration must be requested through the FTA portal, and any unpaid VAT or penalties must be cleared.

VAT records (invoices, returns, books of account) must be kept for 5 years, or 15 years if related to real estate.