Quick answer
The standard UAE VAT rate is 5%. Zero-rated supplies are taxable at 0%, which generally allows recovery of related input VAT. Exempt supplies carry no output VAT, but related input VAT is generally restricted. Outside-scope transactions are not treated as UAE supplies for VAT purposes, although they may still affect records and input-tax apportionment.
UAE VAT Rates at a Glance
| Classification | VAT Charged | Input VAT Recovery | Typical Examples |
|---|---|---|---|
| Standard-rated | 5% | Generally available where conditions are met | Most domestic goods and services |
| Zero-rated | 0% | Generally available where conditions are met | Certain exports, international transport, healthcare and education |
| Exempt | No VAT charged | Generally restricted for directly related costs | Certain financial services, residential property, bare land and local passenger transport |
| Outside scope | Not a UAE taxable supply | Depends on the transaction and use of the cost | Certain overseas supplies or transactions without a UAE place of supply |
Complete UAE VAT Rate Guide
1. Standard VAT rate of 5%
2. Zero-rated supplies
3. Exempt supplies
4. Outside-scope transactions
5. VAT rates by sector
6. VAT calculations
7. Imports and reverse charge
8. Registration thresholds
9. Common mistakes
10. Frequently asked questions
The Standard UAE VAT Rate Is 5%
VAT was introduced in the UAE on 1 January 2018 at a standard rate of 5%. It is a consumption tax charged through the supply chain and ultimately borne by the final consumer.
The 5% rate generally applies to a taxable supply made in the UAE unless a specific rule provides zero-rating, exemption or outside-scope treatment.
- Retail and wholesale goods
- Consulting, accounting, legal, marketing and IT services
- Restaurant, catering and hotel services
- Commercial property sales and leases
- Construction and maintenance
- Most domestic freight and logistics services
One business can use several VAT treatments
A company can make standard-rated, zero-rated, exempt and outside-scope transactions in the same Tax Period. The rate is determined transaction by transaction.
What Does 0% VAT Mean?
A zero-rated supply remains a taxable supply. The supplier charges VAT at 0%, reports the transaction and can generally recover related input VAT when the recovery conditions are satisfied.
Common zero-rated categories include:
Certain exports of goods supported by the required export evidence
Certain exported services meeting the place-of-supply and zero-rating conditions
International transport and certain directly related supplies
Qualifying healthcare services and related goods
Qualifying education and directly related supplies
First supply of a qualifying residential building within the applicable period
Certain investment precious metals
A foreign customer or overseas address does not automatically justify 0% VAT. The supplier must satisfy the conditions and retain evidence.
What Is an Exempt Supply?
No output VAT is charged on an exempt supply. Unlike zero-rated supplies, input VAT directly connected with exempt supplies is generally not recoverable.
Businesses making taxable and exempt supplies may need input-tax apportionment and annual adjustments.
Certain margin-based financial services
Subsequent supplies and leases of qualifying residential buildings
Supply of bare land
Qualifying local passenger transport
0% and exempt are not interchangeable
Both can produce no VAT collected from the customer, but input VAT recovery and return reporting differ significantly.
What Is Outside the Scope of UAE VAT?
A transaction may be outside scope when it is not treated as a supply in the UAE, is not made by a taxable person in business, or falls outside the charging rules.
- Certain supplies whose place of supply is outside the UAE
- Some transactions between members of the same VAT group
- Certain transfers of an entire business meeting the conditions
- Salary payments outside a business-supply relationship
- Qualifying true-agent disbursements
“Outside scope” is not a fallback tax code. The contractual relationship, consideration and place-of-supply rules must support it.
The legal character of the transaction determines the VAT rate—not the tax code selected in accounting software.
UAE VAT Rates by Sector
Real estate
Commercial property is generally subject to 5%. The first supply of a qualifying residential building within the statutory period is generally zero-rated; later qualifying residential supplies are generally exempt. Bare land can be exempt, while developed land may not qualify.
Education
Qualifying education by an eligible institution can be zero-rated. Uniforms, devices, food, transport and extracurricular activities may have different treatment.
Healthcare
Qualifying preventive and basic healthcare can be zero-rated. Cosmetic, elective and non-qualifying services may be standard-rated.
Financial services
Explicit fees and commissions are commonly standard-rated, while certain margin-based financial services may be exempt.
Transport
Qualifying international transport can be zero-rated. Local passenger transport may be exempt, while domestic freight and courier services are generally standard-rated.
Professional and digital services
Domestic consultancy, accounting, legal, marketing and software services are generally standard-rated. Overseas customers require a place-of-supply and export-of-services review. See our VAT on services guide.
How to Calculate 5% VAT
VAT-exclusive price
VAT amount = Net price × 5%
Gross price = Net price × 1.05
AED 10,000 excluding VAT
VAT = AED 500
Total = AED 10,500
VAT-inclusive price
VAT amount = Gross price × 5 ÷ 105
Net price = Gross price ÷ 1.05
AED 10,500 including VAT
VAT = AED 500
Net price = AED 10,000
Use our VAT calculator, calculation guide and worked examples.
VAT on Imports and Reverse Charge
Imported goods are generally subject to UAE VAT unless specific relief applies. The VAT base can include customs value and relevant duties or charges.
A VAT-registered UAE business receiving services from abroad may need to self-account under the reverse charge mechanism, even when the foreign invoice does not show UAE VAT.
Reverse-charge or import VAT may be recoverable when used for eligible taxable activities and the documentary conditions are satisfied. Read our VAT on imports guide.
Free Zones and Designated Zones
A Free Zone company is not automatically outside UAE VAT. Most Free Zones follow normal mainland VAT treatment.
Certain Designated Zones can receive special treatment for qualifying goods transactions when customs-control conditions are met. The special treatment does not generally extend to services solely because a supplier or customer is located there.
UAE VAT Registration Thresholds
Mandatory registration
A UAE-resident business generally must register when taxable supplies and imports exceed AED 375,000 over the previous 12 months or are expected to exceed it within 30 days.
Voluntary registration
A UAE-resident business may register voluntarily where taxable supplies, imports or taxable expenses exceed AED 187,500 over the previous 12 months or are expected to exceed it within 30 days.
Non-resident businesses
A non-resident making taxable UAE supplies may need to register without the AED 375,000 threshold unless another UAE person is responsible for the VAT.
Zero-rated supplies count as taxable supplies
A business making only zero-rated supplies may still exceed the threshold, although it may qualify to apply for an exception from registration.
See our registration threshold guide.
How VAT Rates Affect Invoices and Returns
A VAT-registered supplier must issue the correct tax invoice with the required details and VAT rate. Standard-rated, zero-rated, exempt and reverse-charge amounts are reported differently in the VAT return.
A zero VAT amount does not mean the transaction can be omitted. Businesses with taxable and exempt activities may also need input-tax apportionment.
Review our VAT invoice requirements and VAT filing guide.
Common UAE VAT-Rate Mistakes
Treating every overseas customer as zero-rated
Customer location alone is not enough; place of supply, presence, use and evidence matter.
Confusing zero-rated with exempt
This can distort input VAT recovery and return reporting.
Assuming Free Zone means no VAT
Most Free Zone transactions remain subject to normal VAT rules.
Ignoring reverse charge
Foreign software, advertising and consultancy can create reverse-charge obligations.
Recovering VAT linked to exempt activities
Direct input VAT may be blocked and overhead VAT may require apportionment.
Using software as the legal analysis
The contract and transaction evidence must support the selected tax code.
VAT Rate Decision Checklist
1. Identify the supply: goods, services, property, financial service or mixed supply.
2. Confirm supplier and customer: legal entity, VAT status and location.
3. Determine place of supply: establish whether UAE VAT applies.
4. Test specific relief: verify every zero-rating or exemption condition.
5. Verify evidence: contracts, export records, licences and customer details.
6. Determine taxable value: review discounts, duties and incidental charges.
7. Review input VAT: confirm recovery, restriction or apportionment.
8. Align invoice and return: use the correct wording, tax code and return box.
The Accountant LLC
Apply the Correct VAT Rate Before the Invoice Is Issued
We help UAE businesses review contracts and transactions, confirm VAT rates, register with the FTA, prepare compliant invoices, reconcile VAT accounts and file accurate VAT returns.
Frequently Asked Questions
What is the VAT rate in the UAE?
The standard rate is 5%. Some supplies are zero-rated, exempt or outside scope.
Is 0% VAT the same as exempt?
No. Zero-rated supplies are taxable and generally preserve input VAT recovery; exempt supplies generally restrict related recovery.
Do I charge VAT to an overseas customer?
It depends on the goods or services, place of supply, customer presence, use and evidence. Overseas location alone is not decisive.
Do Free Zone companies charge VAT?
Often yes. Free Zone status does not automatically remove VAT.
How do I remove VAT from an inclusive price?
Multiply the gross price by 5 and divide by 105. The balance is the net price.
What is the mandatory registration threshold?
For UAE-resident businesses, it is generally AED 375,000 of taxable supplies and imports.
When is a VAT return due?
A registered business generally files and pays within 28 days after the end of its assigned Tax Period.
Related UAE VAT Guides
What Is VAT in the UAE? →
How to Calculate VAT →
VAT Registration Threshold →
VAT Invoice Requirements →
VAT Filing UAE →
VAT on Imports →
Worked VAT Examples →
Professional review and official sources
Last reviewed: July 2026. VAT treatment depends on the goods or services, supplier, customer, location, contractual terms, evidence and use of the related cost.
UAE Ministry of Finance — Value Added Tax
Federal Tax Authority — VAT
Federal Tax Authority — VAT Registration
Federal Tax Authority — VAT Returns and Payments
