The UAE VAT system mandates VAT registration for businesses with an annual turnover exceeding AED 375,000. Those with an annual turnover between AED 187,500 and AED 375,000 can voluntarily register.
Businesses must charge VAT at the standard 5% rate on taxable supplies, which include goods or services sold or provided within the UAE, imports into the UAE, and supplies to customers outside the UAE. VAT-registered businesses must file VAT returns quarterly and settle any outstanding VAT payments owed to the Federal Tax Authority (FTA) within 28 days of the tax period's close.
VAT compliance is paramount and necessitates meticulous record-keeping, including VAT invoices and credit notes. Non-compliance can lead to substantial fines and penalties, with businesses facing fines of up to AED 20,000 for failure to register or late VAT return submissions.
