What Is the VAT Rate in the UAE?

The standard VAT rate in the UAE is 5%, and it applies to most goods and services. A limited set of supplies is zero-rated at 0%, and another set is exempt, and the two are treated differently. VAT has applied in the UAE since 1 January 2018.

The 5% standard rate

Most goods and services supplied in the UAE are standard-rated at 5%. If you are a VAT-registered business, you charge 5% on these supplies, collect it from your customers, and account for it to the Federal Tax Authority, while recovering the VAT you pay on your own business costs.

Zero-rated supplies

Zero-rated supplies are still taxable, but the rate is 0%. The advantage is that a business making zero-rated supplies can still recover the input VAT on its related costs. Common examples include:

• Exports of goods and services outside the GCC
• International transport of passengers and goods
• Certain healthcare and education services
• The first supply of newly constructed residential property
• Investment-grade precious metals

Exempt supplies

Exempt supplies carry no VAT, and the key difference is that a business generally cannot recover input VAT on costs relating to them. Common examples include:

• Certain financial services
• Residential property, on lease and on subsequent sale
• Bare land
• Local passenger transport

Zero-rated versus exempt, why it matters

The two sound similar but behave differently. Zero-rated means taxable at 0% with the right to recover related input VAT. Exempt means outside the charge, with no right to recover related input VAT. For a business, that distinction directly affects how much VAT you can reclaim, and getting the classification of your supplies right is one of the more common areas where errors arise.

When you need to register

VAT registration is mandatory once your taxable supplies and imports exceed AED 375,000 over the previous 12 months, and voluntary once they exceed AED 187,500. If you are approaching the threshold, see our guide on how to register for VAT in the UAE.