What is VAT in the UAE and How Does It Work?
How Does VAT Work?
When a business sells goods or services, it adds 5% VAT to the sale price.
The business collects this tax from customers and can deduct VAT paid on its purchases (inputs).
The difference is what gets paid to the FTA.
Example:
Output VAT (on sales): AED 10,000 × 5% = AED 500
Input VAT (on purchases): AED 200
VAT Payable: AED 500 – AED 200 = AED 300
VAT Rates in the UAE
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Standard Rate: 5%
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Zero-Rated (0%) — for sectors like exports, education, and healthcare
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Exempt: residential real estate and certain financial services
Who Must Register for VAT?
Businesses are required to register if their annual taxable supplies exceed AED 375,000 (mandatory threshold).
Voluntary registration is possible when exceeding AED 187,500.
You can register online via the FTA e-Services Portal: tax.gov.ae
Responsibilities After Registration
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Issue valid tax invoices for all taxable transactions
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File quarterly VAT returns through the FTA portal
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Maintain accounting records and invoices for at least 5 years
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Pay VAT on time to avoid penalties
How YAS ACCOUNT Helps?
Automatic VAT calculation for all sales and purchases
Generates FTA-compliant XML VAT returns
Deadline reminders to avoid late filing fines
Integrated with UAE e-invoicing standards
With YAS ACCOUNT, VAT compliance becomes faster, simpler, and 100% accurate.
