UAE VAT rules are clear, but missing one requirement can lead to penalties, fines or rejected returns. This guide covers what registered businesses must keep, record and file.
VAT in brief
VAT began on 1 January 2018 at a standard rate of 5%. It applies to most goods and services, except exempt or zero-rated supplies. Businesses must follow the record-keeping rules set by the FTA.
Who has to follow them
- Mandatory registration: taxable supplies above AED 375,000 a year.
- Voluntary registration: above AED 187,500.
Registered businesses must comply even if they are temporarily inactive or made no sales in the year.
The key requirements
Keep proper VAT records
Keep records for at least five years, and longer for real estate. They include invoices, credit and debit notes, import and export documents, bank statements and inventory records. The FTA can request them at any time.
Issue VAT-compliant tax invoices
A tax invoice shows the supplier's name, address and tax registration number, the customer's details, the date, a description of the goods or services, the price before VAT, the 5% VAT amount, the total and, for foreign currency invoices, the exchange rate.
Keep digital and physical records
Digital records must be readable, secure and retrievable for audits. Use reliable accounting software rather than loose spreadsheets.
Track output and input VAT
The VAT payable is output VAT less input VAT. Wrong input VAT claims can lead to fines.
Maintain a VAT ledger
Summarise the VAT collected, the VAT paid, adjustments and refund claims.
File returns on time
Returns are monthly or quarterly and due within 28 days after the end of the tax period. Late, incorrect or wrong-amount filings attract penalties.
Pay the VAT due
Payment can be made by the approved electronic payment channels. Penalties accrue on unpaid VAT.
Record zero-rated and exempt supplies separately
Zero-rated supplies (such as exports and new residential buildings) and exempt supplies (such as life insurance and bare land) are treated differently, and they affect how much input VAT you can recover.
Account for the reverse charge
On certain imports, the buyer accounts for the VAT. Record the transaction, the self-charged output VAT and any input VAT claim.
Prepare for audits
The FTA can audit at any time and review sales, purchases, returns, bank statements and contracts.
Penalties
Record-keeping failures are commonly penalised with AED 10,000, rising to AED 20,000 for repeats. Failing to issue a proper tax invoice can attract a penalty per invoice. Late returns are fined, and underpaid VAT carries percentage-based penalties. Confirm the current schedule with the FTA.
Best practices
- Use VAT-compliant software.
- Reconcile VAT monthly, even if you file quarterly.
- Store digital copies of invoices.
- Train your staff.
- Review the VAT treatment of your supplies regularly.
- Consider outsourcing if you are unsure.
Consistency is the key: clean records, accurate returns and on-time payments. See our VAT services and accounting service.
Key takeaways
- Keep VAT records for at least five years (longer for real estate).
- Issue compliant tax invoices and reconcile VAT monthly.
- Record zero-rated, exempt and reverse-charge supplies separately.
Frequently asked questions
How long must I keep VAT records?
At least five years, longer for real estate.
Must an inactive business still file?
Yes, while it remains VAT-registered.
What should a tax invoice contain?
Supplier and customer details, tax registration number, date, description, pre-VAT price, VAT amount and total.
Talk to a chartered accountant
Questions about your own situation? Reach us directly and we will reply with clear next steps.
This article is general information and not advice for your specific circumstances. Rules and thresholds change, so confirm the current position before you act.
