VAT in Dubai is a flat 5% rate applied to all taxable supplies, including imports. Some services are exempt, so determining if you have a taxable supply is crucial. This includes retail, restaurant food, hotel services, and entertainment activities, making most businesses in Dubai subject to VAT.

• To determine if the 5% VAT applies, assess if your supplies fall under 0% VAT or exemptions.
• Businesses with taxable supplies may have certain services at a 0% VAT rate, necessitating zero value on invoices.
• The 0% VAT is for goods/services exported beyond Gulf Cooperation Council (GCC) member states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.
• Zero-rated VAT applies to international transport, crude oil/natural gas supply, and investment-grade precious metals like silver/gold (99% purity).
• Healthcare, education, and newly constructed residential properties supplied within 3 years benefit from 0% VAT.
• Individuals considered “outside of the state” for less than a month or non-supply-related reasons qualify for 0% VAT.
• Zero-rated VAT differs from exempt VAT; registration and invoicing are required, with 0% VAT charged on taxable supplies.

Exempt services in VAT differ from zero-rated services, where businesses charge 0% VAT. Four items are completely exempt: financial services, supply of residential property, vacant land, and local public transportation.

Financial services, dealing with money like currency exchange or loans, are generally VAT-exempt when provided with a fee, discount, or commission. Insurance contracts are also exempt.

Supply of residential buildings, not movable structures, is VAT-exempt. Local transportation by land, water, or air is also exempt, including helicopters or airplanes.

If none of your taxable supplies are zero-rated or exempt, a 5% VAT applies. Not all businesses need VAT registration; it’s mandatory only if annual taxable supplies or imports exceed AED 375,000. Optionally, businesses with taxable supplies or imports over AED 187,500 may choose to register for VAT.

Businesses charge VAT to customers and pay VAT on purchases. They can reclaim some paid VAT, termed Input Tax. Subtracting Input Tax from total VAT collected gives net VAT liability.

Recovery is possible for VAT paid on inputs, preventing double taxation. Exempt services are ineligible for VAT recovery.

It’s imperative to register for VAT, overseen by the FTA in Dubai. Firstly, create an e-service account using a valid email. Proceed to register via the FTA portal, providing necessary details and attaching documents. Upon approval, receive a unique Tax Registration Number for portal access.

Monitor taxable supplies diligently to avoid surpassing the registration threshold unknowingly. VAT returns must be filed online with the FTA within 28 days after each tax period, varying based on annual turnover. Businesses with turnovers below AED 150 million file monthly, while those exceeding this threshold file monthly to ensure timely and manageable VAT payments.

• Submit an online VAT return to the FTA at the end of each tax period, detailing total taxable supplies and VAT collected.
• Quarterly VAT returns and payments are due by the 28th of the following month, with late filing incurring penalties starting at AED 1,000.
• Late payment penalties start at 2% of the outstanding VAT amount for the first 7 days, escalating to 4% thereafter.
• Daily penalties apply if VAT remains unpaid after a month, reaching up to 300% of the outstanding amount.
• VAT returns are mandatory for all supplies, including zero-rated, to avoid penalties.
• VAT payments can be settled online via the FTA website using credit card, eDebit, or bank transfer, locally or internationally.
• Timely payment ensures compliance and avoids penalties, facilitated by flexible payment options.