Dubai VAT system for foreign investors (2025)

Key Features of Dubai VAT:

• Standard VAT Rate:
  • The standard VAT rate in the UAE, including Dubai, is 5%. This applies to most goods and services.  
• VAT Registration:
  • Businesses with a taxable turnover exceeding AED 375,000 within a 12-month period must register for VAT.  
  • Voluntary registration is possible for businesses with lower turnover.
  • Foreign businesses conducting taxable activities in Dubai are also required to register, even if they don't have a physical presence.  
• Zero-Rated and Exempt Supplies:
  • Certain goods and services are zero-rated, meaning VAT is charged at 0%.
    Examples include:
    • Exports of goods and services outside the GCC.  
    • International transportation.
    • Certain healthcare and education services.
     
   
• Exempt supplies are outside the scope of VAT. Examples include:
  • Certain financial services.
  • Residential buildings.  
  • Bare land.
• It is very important to check the Federal Tax Authority (FTA) website for the most current list of zero rated and exempt items.
• Input VAT Recovery:
  • Businesses can recover input VAT incurred on eligible purchases related to their taxable supplies.  
  • Accurate record-keeping is essential for input VAT recovery.  
• Reverse Charge Mechanism:
  • The reverse charge mechanism applies to certain transactions, where the recipient of the goods or services is responsible for accounting for the VAT.
  • This is common in cross-border transactions and certain B2B services.  
• VAT Returns and Payment:
  • Businesses must file VAT returns periodically (monthly or quarterly), depending on their turnover.  
  • VAT payments are due by the deadlines specified by the FTA.  
  • The FTA has an online portal that is used for the filing of VAT returns.
   
• Designated Zones:
  • Designated Zones are treated as being outside the state for VAT purposes, under specific conditions. Therefore, movement of goods between designated zones, and outside of the UAE, can be done without VAT implications.

Important Considerations for Foreign Investors:

• VAT Registration Obligations:
  • Determine your VAT registration obligations based on your business activities in Dubai.
• Accurate Record-Keeping:
  • Maintain accurate and complete records of all VAT transactions.
• Compliance with Deadlines:
  • Ensure timely filing of VAT returns and payment of VAT.
• Professional Advice:
  • Seek professional VAT advice to ensure compliance and avoid penalties.
• FTA Guidelines:
  • Stay updated with the latest guidelines and regulations issued by the FTA.

Key Takeaway: