UAE VAT Accounting: A Complete Guide for Dubai Businesses
UAE VAT has been in force since January 2018. If your business is VAT-registered, here is what you need to track, how to file, and how the right software makes it manageable.
UAE VAT: The Basics
The UAE introduced a 5% Value Added Tax (VAT) on 1 January 2018. The Federal Tax Authority (FTA) administers VAT registration, return filing, and audits. Businesses that meet the revenue threshold must register, collect VAT from customers, and remit the net amount to the FTA.
VAT Registration Thresholds
- Mandatory registration — Annual taxable supplies exceeding AED 375,000
- Voluntary registration — Annual taxable supplies between AED 187,500 and AED 375,000
If you are below the mandatory threshold, you can choose to register voluntarily to reclaim input VAT on your purchases.
Types of Supplies
Standard-Rated (5%)
Most goods and services in the UAE — commercial real estate, professional services, retail, restaurants, and more.
Zero-Rated (0%)
VAT applies at 0%, meaning you charge no VAT but can still reclaim input VAT on related costs. Examples include:
- Export of goods and services outside the UAE
- International transport
- Certain educational and healthcare services
Exempt
No VAT is charged and input VAT on related costs cannot be reclaimed. Examples include:
- Residential property rental and sale
- Bare land supply
- Local passenger transport
- Certain financial services
Input Tax Credit
When your business pays VAT on purchases (input VAT), you can deduct this from the VAT you collected on sales (output VAT). You remit only the difference. This mechanism prevents cascading tax and ensures VAT is ultimately borne by the end consumer.
Filing VAT Returns
VAT returns are filed with the FTA:
- Quarterly for most businesses
- Monthly for some large taxpayers or specific sectors
The return reports your output VAT, input VAT, and net amount payable (or refundable).
Record-Keeping Requirements
All VAT-related records must be kept for five years. This includes:
- Tax invoices issued and received
- Credit notes and debit notes
- Import and export documentation
- VAT calculations and returns filed
How E-Invoicing Connects to VAT
The UAE e-invoicing mandate builds on the VAT framework. From your phase go-live date, all VAT invoices must be in a structured electronic format. This means your accounting software must generate and archive these invoices in a way the FTA can verify.
Simplify VAT Accounting with Pyalm Books
Pyalm Books automates UAE VAT calculations, generates FTA-ready VAT returns, and stores all required invoice records. As e-invoicing becomes mandatory, Pyalm Books is built to handle both simultaneously.