Glossary · VAT 5%
What Is VAT 5% in the UAE
VAT in the UAE is 5% on most goods and services. Registration is mandatory once annual turnover exceeds AED 375,000 and voluntary from AED 187,500.
Why it matters
Why it matters when opening a company
VAT registration is the compliance milestone that follows growth — crossing the threshold without registering triggers penalties.
Companies recover input VAT on purchases, so registration is often cash-flow positive for active businesses.
Process
How it works
-
Monitor annual taxable turnover
Step 1 -
Register with the Federal Tax Authority (mandatory from AED 375,000)
Step 2 -
File periodic VAT returns and pay collected VAT
Step 3
Mini-FAQ
Common questions
When is VAT registration mandatory?
When annual taxable turnover exceeds AED 375,000; voluntary registration is possible from AED 187,500.
Do free-zone companies charge VAT?
Yes, on mainland supplies at 5%; goods and services wholly within designated zones can qualify for 0% treatment under conditions.