UAE · Guide
UAE VAT at 5%: registration thresholds and penalties in 2026
The AED 375,000 and AED 187,500 thresholds, registration and filing deadlines, new penalties from April 2026 and zero-rating for exported services.
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- Globexpat Team
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#Taxes#Reporting#Company
A UAE company must register for VAT when its taxable supplies over the last 12 months exceed AED 375,000, or are expected to exceed that amount in the next 30 days. Voluntary registration is possible from AED 187,500 of turnover or expenses. The tax rate is 5%, and returns are usually filed quarterly.
The main trap for new owners: zero-rated supplies count towards the threshold. A consultant who works only with foreign clients and invoices without VAT may still be required to register. The tax on those services will be 0%, but the registration, the returns and the penalties for missing them are real.
Below we explain how to calculate the threshold, when exported services are zero-rated, what late filing costs and what changed in 2026.
Registration thresholds
| Situation | Threshold | What to do |
|---|---|---|
| Taxable supplies and imports over 12 months | Above AED 375,000 | Mandatory registration, apply within 30 days |
| Expected supplies in the next 30 days | Above AED 375,000 | Mandatory registration before you exceed it |
| Supplies or taxable expenses over 12 months | Above AED 187,500 | Voluntary registration if you wish |
| Only zero-rated supplies | Above AED 375,000 | You can ask the FTA for an exception from registration |
What counts towards the threshold: standard-rated supplies at 5%, zero-rated supplies (exports, international transport) and imports of goods and services where tax is paid under the reverse charge. What does not count: exempt supplies (for example, residential rent and some financial services) and sales of capital assets.
The threshold is calculated on a rolling basis. Check it at the end of every month, not once a year: if in October the total from November of last year to October of this year exceeds AED 375,000, the 30-day countdown has started.
When voluntary registration pays
Voluntary registration from AED 187,500 gives you the right to recover input VAT on expenses: office rent, equipment and contractor services in the UAE. It makes sense if:
- the company's clients are themselves VAT payers in the UAE and accept invoices with 5% without issue;
- the company has large VAT-bearing expenses in the country;
- the company exports and wants to recover input tax.
If your clients are individuals, voluntary registration is usually not worth it: their prices go up by 5%, and they cannot recover the tax.
Zero-rating for exported services
For owners of consulting and IT companies this is the key question. A service is zero-rated if it meets the conditions of Article 31 of the Executive Regulation to the VAT law. In simple terms:
| Condition | What it means in practice |
|---|---|
| The recipient has no place of residence or business in the UAE | The client is a foreign company without an office in the UAE |
| The recipient is outside the UAE when the service is performed | If an individual client flies to Dubai for a meeting, the rate may become 5% |
| The service is not linked to property or goods in the UAE | Repairs or valuing a property in Dubai are taxed at 5% |
| There is evidence | Contract, invoice and data on where the client is located |
If the client is a company in Europe, Central Asia or elsewhere with no presence in the UAE, software development or consulting is usually zero-rated. If the client is a UAE mainland or free zone company, the rate is 5%. We recommend keeping a client register with the country for each client and keeping the evidence: in an FTA audit the burden of proof is on the company.
Filing and payment deadlines
The standard tax period is quarterly, and the FTA may assign a monthly period to large companies. The return is filed and the tax paid by the 28th day of the month after the period ends.
| Period | Deadline for return and payment |
|---|---|
| January-March | 28 April |
| April-June | 28 July |
| July-September | 28 October |
| October-December | 28 January |
The FTA assigns your quarters at registration, and they may be shifted (for example, February-April). Check your dates in EmaraTax as soon as you receive your TRN.
Penalties
Since 14 April 2026, Cabinet Decision No. 129 of 2025 has been in force and has changed some of the penalties. The main amounts:
| Breach | Penalty |
|---|---|
| Late registration | AED 10,000 |
| Late return, first time | AED 1,000 |
| Late return, repeated within 24 months | AED 2,000 |
| Late payment (from 14.04.2026) | 14% per year, charged monthly (about 1.17% per month) |
| Late payment (before 14.04.2026) | 2% immediately, then 4% per month, capped at 300% |
| Late deregistration application | AED 1,000 per month, up to AED 10,000 |
Penalty amounts, other than late payment penalties, are as of August 2026, so check them on tax.gov.ae: the FTA publishes an updated penalty table.
For comparison: under the old system an unpaid AED 20,000 left for 3 months became a penalty of about AED 2,000, while under the new one it comes to about AED 700. The system has become milder, but late registration still costs AED 10,000, and it is the most common mistake new companies make.
How registration works
The application is filed in EmaraTax on behalf of the company. You will need:
- the trade license and incorporation documents;
- passports and Emirates IDs of the manager and owners;
- the company's bank account details;
- evidence of turnover for the last 12 months (statements, invoices, sales report) or a 30-day forecast;
- contact details and the address from the lease.
The FTA usually reviews the application within 20 working days and may ask for clarifications, as of August 2026, so check before applying. Once approved, the company receives a TRN (tax registration number), and from the registration date all invoices to UAE clients are issued with VAT and the TRN shown.
Free zones and VAT
A free zone company pays VAT in the same way as a mainland company. The only exception concerns goods in so-called designated zones: supplies of goods within and between them are outside the scope of VAT if the conditions are met. Services, including consulting and IT, are taxed in the usual way in any free zone. If you are choosing a zone with goods trading in mind, check its status in advance. We discuss this separately when helping you choose a free zone company.
What changed in 2026
- Amendments to the VAT law from 1 January 2026 (Federal Decree-Law No. 16 of 2025). Under the reverse charge you no longer need to issue an invoice to yourself, and keeping supporting documents is enough. A 5-year deadline now applies to refunds of overpaid tax. The FTA has gained the right to deny input VAT recovery if a supply is part of an evasion scheme, so it is worth checking your suppliers.
- New penalties from 14 April 2026. The late payment penalty is now 14% per year instead of the stepped 2% and 4% scheme.
- E-invoicing. The pilot started on 1 July 2026. Companies with revenue of AED 50 million or more switch to e-invoicing from 1 January 2027 (the provider had to be appointed by 31 July 2026). Everyone else appoints a provider by 31 March 2027 and switches from 1 July 2027. This applies to B2B and B2G transactions.
FAQ
Do I need to register for VAT if all my clients are abroad?
If your supplies over 12 months exceed AED 375,000, formally yes, because zero-rated supplies count towards the threshold. But if all your supplies are zero-rated, you can apply to the FTA for an exception from registration. The FTA makes the decision.
Does VAT count towards the AED 375,000 threshold for corporate tax?
These are different thresholds. AED 375,000 in corporate tax refers to profit, and in VAT to turnover. More on profit tax in Small Business Relief.
Can I deregister from VAT if turnover falls?
Yes, if taxable supplies over 12 months are below AED 187,500, the company can apply. If the business has stopped entirely, the application must be filed within 20 working days, otherwise the penalty is AED 1,000 per month.
How long must I keep VAT records?
At least 5 years after the end of the tax period, and longer for property transactions. Invoices, contracts and export evidence are needed in any audit.
Who files the returns?
The company itself through EmaraTax, or a tax agent. We file returns for our accounting clients and check the rate for each client in advance.
Sources
- Federal Tax Authority, VAT: tax.gov.ae
- Federal Decree-Law No. 8 of 2017 on VAT and Federal Decree-Law No. 16 of 2025: uaelegislation.gov.ae
- UAE Ministry of Finance, e-invoicing (Ministerial Decisions No. 243 and 244 of 2025): mof.gov.ae
- UAE government portal, VAT section: u.ae