VAT in the UAE: registration, returns and penalties in 2026
VAT in the UAE is 5% — one of the lowest rates in the world. It is also where businesses collect the most penalties: the registration threshold runs on a rolling twelve months, you get 30 days to apply, and returns are due quarterly on a hard date. In April 2026 the penalty regime was rewritten from scratch, and on balance it is now gentler on those who correct their own mistakes.
- Rate
- 5%
- Mandatory registration
- from AED 375,000 turnover
- Return due
- by the 28th
- Late registration penalty
- AED 10,000
5%, zero-rated and exempt are three different things
The standard rate is 5%. Some supplies are zero-rated and some are exempt, and confusing the two is expensive:
| Treatment | Examples | Input VAT |
|---|---|---|
| 5%, standard-rated | most goods and services inside the UAE | recoverable |
| 0%, zero-rated | exports of goods and services outside the GCC, international transport, certain education and healthcare | recoverable |
| Exempt | certain financial services, lease and sale of residential property (after the first supply), local passenger transport, bare land | not recoverable |
The difference is fundamental: on zero-rated supplies you charge no tax but still recover the VAT on your costs. On exempt supplies you charge nothing and recover nothing. For a company exporting services this often makes registration worth having: there is nothing to charge, and input tax comes back.
When registration is mandatory
You must register if either condition is met:
- taxable turnover over the last 12 months exceeded AED 375,000;
- you expect turnover to exceed AED 375,000 in the next 30 days.
Once the threshold is crossed you have 30 days to apply. Miss it and the penalty is AED 10,000.
Voluntary registration is available from AED 187,500 — and that threshold counts taxable expenses as well as turnover. This is the route for an early-stage company spending more than it earns that wants to recover input tax.
The threshold runs on a rolling 12 months, not on the calendar year. It has to be checked monthly: you can cross it mid-year, and the 30-day clock starts from that moment, not from 1 January. This is exactly where companies with seasonal revenue lose money.
Standard-rated and zero-rated supplies count towards the threshold, as do imports on which you account for tax as the recipient. Exempt supplies do not count.
Returns: frequency and deadlines
The FTA assigns your tax period on registration. Most companies file quarterly; larger turnovers are moved to monthly periods.
The return and the payment are both due on the 28th day of the month following the end of the period. If the 28th falls on a weekend or public holiday, the deadline moves to the next business day.
| Quarter | Filing and payment deadline |
|---|---|
| January – March | 28 April |
| April – June | 28 July |
| July – September | 28 October |
| October – December | 28 January |
Returns are filed through the EmaraTax portal. A nil return is still mandatory: if there were no transactions in the quarter, you file anyway.
The new penalty regime: what changed on 14 April 2026
Cabinet Decision No. 129 of 2025 took effect on 14 April 2026, replacing the previous penalty system. The main change is in late payment interest:
| Breach | Penalty |
|---|---|
| Late VAT registration | AED 10,000 |
| Late filing of a return | AED 1,000 first time, AED 2,000 on repetition within 24 months |
| Late payment of tax | 14% per annum, accrued monthly on the unpaid amount, no compounding |
| Voluntary disclosure before an audit notice | 1% per month of the underpaid amount |
| The same error found during an FTA audit | 15% fixed + 1% per month + late payment interest |
Before 14 April 2026 the old scheme applied: 2% immediately, then 4% per month, capped at 300% of the tax. The new flat rate is considerably kinder to anyone who has been late for a long time.
Practical takeaway: the gap between 1% per month on a voluntary disclosure and 15% + 1% on an audit assessment is the direct value of finding your own mistake before the FTA does. If you suspect an earlier return is wrong, disclosing it yourself is the cheaper path.
The tax invoice: no invoice, no deduction
There is no single mandatory e-document system in the UAE yet (that is changing — see the next section), but the requirements for the invoice itself are strict. A full tax invoice must show:
- the words "Tax Invoice";
- the supplier's name, address and TRN;
- the customer's name and address, plus their TRN if they are VAT-registered;
- a unique sequential number and the date of issue;
- a description of the goods or services, quantity and price;
- the tax amount in dirhams and the exchange rate used if the invoice is in another currency;
- the total payable.
For supplies under AED 10,000 a simplified invoice is allowed, with fewer particulars. VAT records are kept for 5 years, and real estate records for 15 years.
Note the asymmetry: a defective invoice from your supplier costs you the deduction. Checking other people's documents matters as much as issuing your own correctly.
E-invoicing: the rollout schedule
The UAE is moving to mandatory electronic invoicing. The pilot phase started on 1 July 2026, and the schedule from there is:
| Date | What happens |
|---|---|
| 30 October 2026 | companies with revenue of AED 50M+ must appoint an accredited service provider (ASP) |
| 1 January 2027 | e-invoicing becomes mandatory for companies with revenue of AED 50M+ |
| 1 July 2027 | e-invoicing becomes mandatory for everyone else |
| 1 October 2027 | transactions with government entities (B2G) |
Worth doing now even if your turn comes in 2027: check whether your accounting software supports the required format, and whether moving to the new system also means migrating your entire ledger. Companies on cloud, FTA-compatible platforms (FirstBit, Zoho Books, QuickBooks) will have an easier time than those keeping books in spreadsheets.
Recovering input VAT: where the money is usually lost
Input tax is recoverable when the cost relates to taxable activity and is supported by a valid tax invoice. It is not recoverable on:
- entertainment expenses — hospitality and events for clients and guests;
- personal purchases paid from the company account — the FTA will disallow these for corporate tax purposes too;
- certain categories of motor vehicles available for employees' personal use.
If input tax exceeds output tax for a period, you can carry the difference forward or claim a refund from the FTA. Refunds come with document checks, so the quality of your records decides the outcome.
Five mistakes that cost real money
- Not tracking the threshold. Turnover passed AED 375,000 in May and you noticed in January — AED 10,000 penalty plus the tax for the whole missed period.
- Skipping a nil return. No transactions does not mean no filing: AED 1,000 for the first miss.
- Recovering tax on a defective invoice. An audit will reverse the deduction, and since 14 April 2026 that costs 15% plus interest.
- Treating exempt supplies as zero-rated. Either you lose a deduction you were entitled to, or you claim one you were not.
- Leaving VAT "until quarter end". Reconstructing three months of paperwork in the last week before the 28th reliably produces both errors and a late filing.
What we do
| Service | Fee |
|---|---|
| VAT registration | AED 2,000 |
| VAT + Corporate Tax registration as one package | AED 3,000 |
| Preparing and filing a VAT return | AED 1,500 |
| VAT refund claim with the FTA | 10% of the refund + AED 5,000 |
| Monthly bookkeeping retainer including VAT | from AED 2,000 per month |
We work remotely through EmaraTax and cloud accounting software. We watch the rolling 12-month threshold, prepare and file returns on time, and check supplier invoices before the deduction reaches your return. Corporate tax is covered separately: rates, deadlines and penalties.
Free VAT health check
We will tell you whether it is time to register, whether your tax period is set correctly, whether earlier returns carry risk and whether input tax can be recovered. The review takes one working day.
Frequently asked questions
This material is for general information only and is not tax advice. The data is current as of 21 July 2026. Please confirm rates, thresholds, deadlines and the e-invoicing timeline with the Federal Tax Authority at tax.gov.ae or with us: UAE tax regulation moves quickly, and 2026 alone brought a new penalty regime and new documentation requirements.
