UAE VAT Explained — How VAT Works in the UAE (5% Rate Guide)
Updated October 2026 · 4 min read
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Value Added Tax (VAT) was introduced in the UAE on 1 January 2018 at a rate of 5% — one of the lowest VAT rates in the world. It is administered by the Federal Tax Authority (FTA) and applies to most goods and services supplied in the UAE.
UAE VAT Formulas
Add VAT: VAT-inclusive = Net price × 1.05
Remove VAT: Net price = VAT-inclusive ÷ 1.05
VAT amount = VAT-inclusive ÷ 21
Example: AED 1,050 inc. VAT → net = AED 1,000 | VAT = AED 50
UAE VAT Categories
| Category | Rate | Examples |
|---|---|---|
| Standard rate | 5% | Most goods and services, commercial property |
| Zero-rated | 0% | Exports, international transport, some healthcare & education |
| Exempt | N/A | Bare land, local passenger transport, residential real estate |
VAT Registration Thresholds
Mandatory registration: Businesses with taxable supplies exceeding AED 375,000/year must register. Voluntary registration: Businesses above AED 187,500/year may register voluntarily — useful to reclaim input VAT on purchases. VAT returns are typically filed quarterly using the FTA's EmaraTax portal.
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