In the United Arab Emirates (UAE), businesses are required to register for Value Added Tax (VAT) based on specific thresholds related to their taxable supplies and imports.
Mandatory VAT Registration
A business must register for VAT if:
• The total value of its taxable supplies and imports exceeds AED 375,000 over the previous 12 months, or
• It anticipates that the total value will exceed this threshold in the next 30 days.
This mandatory registration threshold applies to UAE-resident businesses. Non-resident businesses making taxable supplies in the UAE are required to register for VAT regardless of the value of their supplies, provided there is no other person obligated to pay the due tax on these supplies in the UAE.
Voluntary VAT Registration
Businesses may choose to register for VAT voluntarily if:
• Their taxable supplies and imports or taxable expenses exceed AED 187,500 over the previous 12 months, ortax.gov.ae
• They anticipate that these amounts will exceed the voluntary threshold in the next 30 days.
Voluntary registration is particularly beneficial for start-ups and small businesses, as it allows them to reclaim input VAT on their expenses, even if their turnover has not yet reached the mandatory threshold.
Penalties for Non-Compliance
Failure to register for VAT within 30 days of becoming liable can result in an administrative penalty of AED 10,000, along with potential additional fines for late VAT filings and payments
Summary of VAT Registration Thresholds
Registration Type | Threshold Amount | Applicability |
Mandatory | AED 375,000 | UAE-resident businesses exceeding this in taxable supplies/imports over 12 months or expected to exceed in next 30 days. Non-resident businesses making taxable supplies in the UAE must register regardless of threshold. |
Voluntary | AED 187,500 | Businesses with taxable supplies/imports or expenses exceeding this amount over 12 months or expected to exceed in next 30 days. |