What Is VAT in the UAE?

The basics: what VAT is, the 5% standard rate, zero-rated vs exempt supplies, and who it applies to.

Value Added Tax (VAT) is a consumption tax the UAE introduced on 1 January 2018, applied at each step of the supply chain where value is added. Businesses collect VAT from customers on their sales (output tax) and can generally recover the VAT they paid on their own business purchases (input tax) — what actually gets paid to the Federal Tax Authority (FTA) each period is the net difference.

The standard rate

The UAE's standard VAT rate is 5% — one of the lowest VAT rates globally. Most goods and services fall under this rate unless a specific rule places them in a different category.

Zero-rated vs. exempt supplies

These two categories both mean "no VAT is charged" on the sale itself, but they behave very differently for input VAT recovery. Zero-rated supplies (0%) — certain exports, international transport, and specific healthcare and education services — remain "taxable supplies," so the related input VAT a business paid on its own costs is still recoverable. Exempt supplies — certain financial services and bare/residential real estate leases, among others — are not taxable supplies at all, so input VAT tied to them generally cannot be recovered.

Mixing these two up is one of the most common VAT201 filing mistakes — see our VAT201 filing guide for exactly where each appears on the return (Box 4 vs Box 5).

The reverse charge mechanism

For certain transactions — notably imports of goods and services from outside the UAE — the buyer, not the seller, accounts for VAT. The buyer reports the same amount as both an output tax and (if it qualifies) a recoverable input tax on their own return, which nets to zero for a fully taxable business but still needs to be correctly reported.

Who administers it

VAT is administered by the Federal Tax Authority (FTA) through the EmaraTax portal, accessed via UAE Pass (the UAE's national digital identity) rather than a separate email/password login. Registered businesses file periodic VAT returns (Form VAT201) and pay any tax due within 28 days of the end of their tax period.

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