UAE VAT: the two thresholds and the 28-day return

The UAE has charged VAT at 5% since 1 January 2018. The rate sits in Article 3 of Federal Decree-Law No. 8 of 2017 and it has not moved since. Almost no practical question is about the rate. The questions that cost money are whether registration is compulsory yet, what counts towards the threshold, and how much of the tax a business pays out comes back.

Two figures do most of the work. The mandatory registration threshold is AED 375,000 and the voluntary threshold AED 187,500, set in Articles 7 and 8 of the Executive Regulation, Cabinet Decision No. 52 of 2017. Both are rolling twelve-month totals rather than financial-year figures, and a forward-looking test can bite long before any twelve-month total is reached.

Who has to register, and when

Article 13 of the Decree-Law sets two tests for a person resident in the UAE or in another implementing state. The look-back test asks whether supplies under Article 19 exceeded AED 375,000 over the previous 12 months. The look-forward test asks whether it is anticipated they will exceed AED 375,000 in the next 30 days. Either one triggers the obligation on its own.

The application deadline is in Article 7(2) of the Regulation. Thirty days from being required to register. Not from the month end, and not from the accountant noticing. The application is free, and the FTA allows itself 20 business days to process a complete one.

Non-residents are treated differently. A person with no place of residence here or in an implementing state must register if he makes supplies in the UAE and no other person is obliged to pay the due tax on them, under Article 13(2). No threshold applies. Article 7(6) then registers him from the date he started making supplies, notice or no notice.

What goes into the AED 375,000

Article 19 lists the components. Two of them surprise people.

• The value of taxable goods and services supplied.
• The value of concerned goods and services received, the reverse-charge side: imported services a business self-accounts for count towards its own threshold.
• The whole or relevant part of taxable supplies belonging to a business acquired from another person, so an acquisition brings its trading history with it.
• The value of taxable supplies made by related parties, in the cases the Regulation specifies.

Article 20 takes one out. Capital assets belonging to the person are not counted, so selling a building does not by itself push a business over.

Registering voluntarily on expenses alone

Under Article 17 a person may register on taxable expenses rather than supplies. Article 8(5) defines those as expenses subject to the standard rate incurred in the State by a person resident here. A company with AED 200,000 of standard-rated UAE costs in the past twelve months and no revenue at all meets the AED 187,500 test. Article 8(6) still requires proof of a business in the State and an intention to make supplies that carry a right of recovery. A lock-in comes with it: Article 23 bars a voluntary registrant from applying to deregister within 12 months of registration.

The return cycle

The standard tax period is three calendar months ending on a date the Authority determines, under Article 62(1), and Article 62(2) lets it assign a shorter or longer one. The UAE Government portal states the split in operation: quarterly below AED 150 million of annual turnover, monthly at AED 150 million or more.

Filing and payment share one deadline. Article 64(1) requires the return by the 28th day after the tax period ends, and Article 64(3) requires the payable tax to reach the Authority by the same date. Filing on time and paying four days late is two compliance events, not one.

Recovering input tax

Article 54(1) sets the scope: input tax on goods and services used or intended for taxable supplies, for supplies made outside the State that would have been taxable here, and for supplies the Regulation specifies that would have been exempt here. Article 52(1) confines that third category to financial services where the place of supply is outside the State and the recipient is outside it when the services are performed.

Recovery is not automatic on the invoice date. Article 55(1) requires the person to have received and retained the tax invoice and to have paid the consideration or part of it. Article 54(2) softens the payment limb: he counts as having paid to the extent he intends to pay within six months of the agreed date. Missing the right period is not fatal, since Article 55(2) allows the claim in the following return. Costs incurred before registration are claimed on the first return after it under Article 56, though not for services received more than five years earlier.

What does not come back

Article 53 blocks three categories: entertainment provided to anyone not employed by the person, including customers and shareholders; motor vehicles bought, rented or leased for the business that are available for personal use; and goods or services given to employees free of charge for their personal benefit.

The definitions carry the weight. A motor vehicle means a road vehicle built or adapted to carry no more than ten people including the driver, and excludes a truck, forklift or hoist. It is not available for private use where it is a licensed taxi, a registered emergency vehicle, or a rental-business vehicle out with a customer. The employee limb has carve-outs, health insurance among them, covering employees and family up to one spouse and three children under eighteen. Cabinet Decision No. 149 of 2026 narrowed two of those, and employer-provided accommodation is now excluded unless the Ministry of Human Resources and Emiratisation makes it mandatory.

Zero-rated is not exempt

Article 44 makes a zero-rated supply a taxable supply, and that is the whole of the difference. Because it is taxable, the input tax attributable to it is recoverable under Article 54(1)(a). An exempt supply carries no recovery. Article 46 runs to four lines: financial services specified in the Regulation, residential buildings other than the zero-rated first supply, bare land, and local passenger transport. Article 45 lists fourteen categories at the zero rate, among them exports outside the implementing states, international transport, investment precious metals, and the first supply of a residential building within three years of its completion.

A business whose supplies are only zero-rated can ask to be excepted from registration under Article 15(1). It is an exception from registering, not from the law. Article 16(3) requires notice within 10 business days of any supply or import at the standard rate.

Apportionment, and a change already scheduled

A business making both taxable and exempt supplies apportions. Under Article 55(6) input tax wholly attributable to recoverable supplies comes back in full, input tax blocked by Article 53 does not, and the remainder goes through Article 55(7). That runs every tax period. An annual wash-up follows in the first tax period of the next tax year, with a further adjustment where the gap between the formula result and actual use exceeds AED 250,000 in a tax year.

The mechanism is changing. Cabinet Decision No. 149 of 2026 replaces Clauses 6 and 7 of Article 55 for the first tax year commencing after 1 October 2027. The replacement works from the percentage recoverable supplies bear to the total value of all supplies, rounded to a whole number, with capital asset supplies and reverse-charge receipts excluded.

Deregistration, and what registering late actually costs

Deregistration is compulsory under Article 21(1) where the registrant stops making taxable supplies, or where taxable supplies over 12 consecutive months fall below the voluntary threshold. The deadline is 20 business days. Article 14(7) requires all tax and penalties settled and the final return filed, and Article 14(8) deems business assets to be supplied immediately before deregistration. Stock and equipment are taxed on the way out.

Late registration carries a cost separate from any penalty. Article 7(3) has the Authority register the person with effect from the date he first became liable. Article 7(7) then makes him pay the tax on everything sold in the meantime.

That is tax the business never charged its customers. The penalty amounts are not in the VAT law. Late registration, late deregistration, late returns and late settlement are each listed in Article 24(1) of Federal Decree-Law No. 28 of 2022 on Tax Procedures, with the amounts left to a Cabinet decision under Article 24(3). One limit is in the primary law: Article 24(4) states that an administrative penalty shall not exceed two times the amount of tax in respect of which the assessment was issued. Read the Cabinet decision in force before quoting a figure.