VAT (Value Added Tax)

VAT is the UAE's consumption tax, introduced on 1 January 2018 under Federal Decree-Law No. 8 of 2017 at a standard rate of 5%, charged on most supplies of goods and services. Businesses must register with the Federal Tax Authority once taxable supplies cross the mandatory threshold, charge VAT on their sales, recover input VAT on costs, and file periodic returns. Some supplies are zero-rated (such as exports and certain education, healthcare and first residential sales) and others exempt (such as bare residential leases and certain financial services) — the difference matters because zero-rating preserves input recovery while exemption blocks it. Errors attract administrative penalties, and the FTA runs audits, clarification requests and a structured dispute process from reconsideration through the tax dispute committees. It matters because VAT touches every invoice a business issues. You meet it in pricing, contract VAT clauses, real estate transactions, and the quarterly mechanics of filing and payment.