How VAT Works in the UAE: A Small Business Guide

What VAT is and the UAE rate

Value Added Tax (VAT) is a consumption tax charged on most goods and services. In the UAE it is administered by the Federal Tax Authority (FTA) and the standard rate is 5%.

As a business, you generally act as a collector: you charge VAT on your sales (output VAT), you pay VAT on your purchases (input VAT), and you send the difference to the FTA. If your input VAT is higher than your output VAT, you can usually claim a refund or carry it forward.

Some supplies are zero-rated (0%) — such as certain exports and specific healthcare and education items — and some are exempt, like certain financial services and residential leases. The treatment matters, because zero-rated lets you reclaim input VAT while exempt generally does not.

This is general information — confirm current rules with the FTA or a qualified local tax professional before deciding how to treat a specific supply.

Who must register for VAT

Registration depends on your taxable turnover over a rolling period. There are two thresholds you need to know.

• Mandatory registration: your taxable supplies and imports exceed AED 375,000 over the past 12 months, or you expect to exceed it in the next 30 days.
• Voluntary registration: your taxable supplies and imports (or taxable expenses) exceed AED 187,500. This can be useful for early-stage businesses that want to reclaim input VAT.
• Below AED 187,500 you generally cannot register.
• Once registered, the FTA issues you a Tax Registration Number (TRN) that must appear on your tax invoices.

The VAT return (VAT201)

After you register, you report your VAT to the FTA through the VAT return, known as the VAT201. Most small businesses file quarterly, though the FTA may set a monthly period for some — always check the tax period shown in your FTA account.

On the VAT201 you declare your output VAT (VAT charged on sales), your input VAT (VAT paid on purchases you can reclaim), and the net amount due or refundable. The return and any payment are due by the 28th of the month following the end of your tax period.

Filing late or paying late can trigger administrative penalties, so it helps to close your books and reconcile well before the deadline. This is general information — confirm current filing periods, deadlines and penalties with the FTA or a qualified local tax professional.

E-invoicing via the UAE E-Invoicing System (Peppol)

The UAE is introducing a mandatory e-invoicing framework built on the Peppol network — the UAE E-Invoicing System. Instead of sending PDFs by email, businesses will exchange structured electronic invoices through accredited service providers, with data reported to the FTA.

The rollout is phased and focuses first on B2B and B2G transactions. If you sell to other businesses or to government, this will affect how you issue and store invoices, so it's worth preparing your systems early.

Practically, this means your invoicing needs to produce compliant, structured data — not just a printout. Software that can generate correctly formatted invoices with your TRN, line-level VAT and the right identifiers will save a lot of manual work.

Exact dates, covered transactions and technical requirements are being finalised. Confirm the current timeline and your obligations with the FTA or a qualified local tax professional.

What a compliant UAE tax invoice needs

A valid tax invoice is what lets your customers reclaim their input VAT and keeps you compliant. Keep the essentials consistent across every invoice.

• The words "Tax Invoice" clearly shown.
• Your business name, address and TRN.
• A unique sequential invoice number and the date of issue.
• Description of goods or services, quantity and unit price.
• The VAT rate applied and the VAT amount in AED for each line or in total.
• The total amount payable including VAT.
• For simplified retail invoices, the FTA allows a shorter format below certain value limits — check the current rules.

How Tallium helps you stay on top of VAT

Tallium is an all-in-one accounting, POS, inventory and e-commerce platform. It applies the 5% UAE VAT automatically at the point of sale and on invoices, tracks input and output VAT as you go, and prepares the figures you need for your VAT201 — so period-end is a review, not a scramble.

Every sale and purchase flows into your books in real time, receipt scanning captures supplier VAT, and reports break down your net position by tax period. As the UAE E-Invoicing System (Peppol) rolls out, Tallium is built to generate structured, standards-based invoices carrying your TRN and line-level VAT.

Tallium pricing is in US dollars, billed monthly from signup, cancel anytime, with no free trial: a shop/store unit is $79/month, an online store is $159/month, a warehouse is $99/month, and a factory is $269/month. Every unit includes the full core — accounting, VAT/tax handling, expenses and receipt scanning, reports, the mobile app, AI insights and email support at support@tallium.online.

This is general information — confirm current VAT rules and e-invoicing requirements with the FTA or a qualified local tax professional.