Introduced in January 2018, Value Added Tax (VAT) in the United Arab Emirates (UAE) has become an essential aspect for most businesses. While the standard rate is relatively low (5%), non-compliance can lead to significant fines and harm your business. This guide explains everything you need to know to stay compliant and optimize your tax management.

1. VAT in the UAE at a Glance

• Standard rate: 5% on most goods and services.

• Zero rate (0%): Applies to certain sectors (exports, education, healthcare, international transport).

• Exemptions: Some financial services and residential property rentals may be exempt.

• Supervision: The Federal Tax Authority (FTA) is responsible for VAT implementation in the UAE.

2. Who Needs to Register for VAT?

• Mandatory if your turnover exceeds AED 375,000 (over the past 12 months or expected in the next 30 days).

• Optional if your turnover is between AED 187,500 and AED 375,000.

• Not required if your revenue is below AED 187,500, unless you regularly import goods.

• Penalties: Failure to register when required can result in a fine of AED 20,000.

3. How to Register and What Are the Steps?

• Create an account on the FTA portal: tax.gov.ae

• Required documents:

  • Business license

  • Passports of shareholders and directors

  • Bank statements for the past 12 months

  • Proof of turnover (contracts, invoices)

• Submit the application online.

• Processing time: Receive your TRN (Tax Registration Number) in approximately 20 working days.

4. VAT Filing: How It Works

• Filing frequency:

  • Quarterly (default)

  • Monthly (for some high-turnover businesses)

• Deadline: Returns must be submitted by the 28th day following the end of the tax period.

• VAT Calculation:

  • Collected VAT: Amount you must pay to the FTA.

  • Deductible VAT: Amount you can subtract to reduce your payment.

• Example:

  • VAT on sales: AED 100,000 → Collected VAT = AED 5,000

  • Deductible VAT on purchases: AED 50,000 → Deductible VAT = AED 2,500

  • Total VAT payable to the FTA: AED 5,000 - AED 2,500 = AED 2,500

• Penalties: Late or incorrect filing can result in fines of up to AED 10,000 for the first offense.

5. Common Mistakes to Avoid

• Failing to declare some sales or including hidden fees.

• Confusing zero-rated and exempt supplies: They have different implications.

• Not keeping supporting documents for 5 years.

• Using an incorrect TRN on issued invoices.

6. How SLM Consultants Can Help with VAT

• Fast registration with the FTA.

• Preparation and submission of VAT returns on time.

• Invoice and accounting document verification.

• Training for teams to enhance VAT understanding.

• Audit and tax inspection management.

Client Testimonial: "Before working with SLM Consultants, we were often late with our VAT filings. Now, everything is managed efficiently and stress-free!" – Yasmin H., owner of a logistics company.

Benefits of Efficient VAT Management

• ✅ Avoid costly penalties.

• ✅ Improve cash flow through optimized refund management.

• ✅ Strengthen your business credibility.

• ✅ Save time to focus on business growth.