Since its introduction on January 1, 2018, Value Added Tax (VAT) in the UAE has transformed how businesses operate and manage their finances. Governed by the Federal Tax Authority (FTA), VAT is a 5% indirect tax applied to most goods and services.

What is VAT?
VAT is a consumption tax levied at each stage of the supply chain. The final burden is borne by the consumer, while businesses collect and remit the tax to the government.

Who Needs to Register?
Businesses must register for VAT if:

• Their taxable supplies and imports exceed AED 375,000 annually (mandatory registration).
• Their taxable turnover exceeds AED 187,500 (voluntary registration).

Key Components of UAE VAT Law:

• Tax Invoices: Must include specific FTA-required details.
• Filing Returns: Monthly or quarterly returns as per FTA guidelines.
• Input Tax Recovery: Recover VAT on business-related expenses.

Exemptions and Zero-Rated Items:

• Zero-rated: Exports, international transport, certain healthcare and education services.
• Exempt: Residential real estate, local passenger transport, some financial services.

Understanding the framework of UAE VAT laws is critical for business compliance and avoiding penalties.