UAE VAT Guide: Registration, Returns, Penalties and E-Invoicing

Introduction

Registration thresholds, filing deadlines, the 2026 penalty changes and the phased move to mandatory e-invoicing from January 2027.

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Last reviewed 27 October 2026 · Updated · 5 min read

In short

UAE VAT is charged at a standard rate of 5% and has applied since 1 January 2018. A business must register once its taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to within the next 30 days, and may register voluntarily above AED 187,500. Returns and payment are due within 28 days of the end of each tax period, and e-invoicing becomes mandatory from 1 January 2027 for businesses with revenue of AED 50 million or more, with smaller businesses following on 1 July 2027.

When must a business register for VAT?

Registration is based on the value of taxable supplies and imports. Supplies taxed at both 5% and 0% count towards the thresholds.

Failing to apply for registration on time carries a penalty of AED 10,000. The rules are:

  • Mandatory registration: taxable supplies and imports exceeded AED 375,000 over the previous 12 months, or are expected to exceed it in the next 30 days.
  • Voluntary registration: taxable supplies and imports, or taxable expenses, exceeded AED 187,500 over the previous 12 months, or are expected to in the next 30 days. The expenses test allows a start-up with no turnover yet to register.
  • Foreign businesses: the AED 375,000 threshold does not apply to non-resident businesses. A non-resident that makes supplies in the UAE must register from its first supply, whatever the value, where no other person is required to account for the VAT on them.

How does the 5% rate work, and what changed in 2026?

Most goods and services are taxed at 5%. Zero-rated supplies are taxed at 0%, and input tax on related costs can be recovered. Examples include exports outside the GCC, international transport, certain investment-grade precious metals, the first supply of new residential property within three years of construction, and designated education and healthcare services.

Exempt supplies are different: no VAT is charged, but input tax on related costs cannot be recovered. Residential property is generally exempt, while commercial property is taxed at 5%.

Federal Decree-Law No. 16 of 2025 amended the VAT Law from 1 January 2026. Businesses no longer issue self-invoices under the reverse charge, although supporting documents must be kept. Excess refundable tax must now be reclaimed within five years, and the FTA can deny input tax where a supply forms part of a tax evasion arrangement.

When are VAT returns and payments due?

VAT returns are filed through the FTA's EmaraTax portal. The return and any VAT payable are due within 28 days of the end of the tax period.

The standard tax period is quarterly for businesses with annual turnover below AED 150 million, and monthly for those with turnover of AED 150 million or more.

What are the VAT penalties since April 2026?

Cabinet Decision No. 129 of 2025 revised the penalties for VAT, excise tax and tax procedures with effect from 14 April 2026. The main penalties are now:

  • late registration: AED 10,000
  • late filing of a return: AED 1,000 the first time, and AED 2,000 for a repeat within 24 months
  • late payment: 14% per annum, applied monthly to the unpaid tax
  • voluntary disclosure of an error: 1% of the tax difference for each month or part of a month
  • errors not disclosed before the FTA gives notice of a tax audit: a fixed 15% of the tax difference plus 1% per month
  • incorrect return: AED 500, unless corrected within the filing deadline or by a voluntary disclosure that does not change the tax due

When does e-invoicing become mandatory?

Ministerial Decisions No. 243 and No. 244 of 2025, as amended in 2026, set the scope and timeline. E-invoicing covers business-to-business and business-to-government transactions, while supplies to consumers are outside its scope. The Ministry of Finance guidelines state that it applies to any person conducting business in the UAE, whether or not they are VAT registered, unless specifically excluded. A PDF, scanned copy or email is not an e-invoice.

Ministerial Decision No. 197 of 2026 changed several rules from 1 October 2026. Transactions between members of the same VAT group are now excluded for 24 months from 1 January 2027, and records must be kept for the period set by the Tax Procedures Law, with the earlier requirement to store them in the UAE removed. The general deadline for issuing e-invoices moved from 14 days to 14 business days after the transaction, but a VAT registrant must still issue them within the VAT Law timeline, which generally requires a tax invoice within 14 days of the date of supply.

Penalties for breaching the e-invoicing rules are set by Cabinet Decision No. 173 of 2026, which replaces Cabinet Decision No. 106 of 2025. Not implementing e-invoicing, including not appointing an accredited service provider, carries AED 5,000 for the first violation and AED 5,000 for each month or part of a month it continues, up to a total of AED 50,000 in any 12 consecutive months. Not issuing and sending an e-invoice or an electronic credit note through the system carries AED 100 each, up to AED 5,000 a calendar month. The decision does not apply to e-invoices issued voluntarily, and the Ministry's guidelines say that keeping to the roll-out timelines, which include the dates for appointing an accredited service provider, is essential to avoid potential penalties. Our UAE e-invoicing guide has the full list.

A pilot began on 1 July 2026, and any business may adopt e-invoicing voluntarily from that date. E-invoices must be exchanged through a Ministry-accredited service provider (ASP), and each business appoints only one, for both sending and receiving. The mandatory deadlines are:

  • Revenue of AED 50 million or more: ASP appointment deadline 30 October 2026, implementation 1 January 2027. In May 2026, the appointment deadline was moved from 31 July 2026.
  • Revenue below AED 50 million: ASP appointment deadline 31 March 2027, implementation 1 July 2027.
  • Government entities: ASP appointment deadline 31 March 2027, implementation 1 October 2027.

Frequently asked questions

Do I have to register for VAT below AED 375,000?

Not usually. Below AED 375,000, registration is optional once supplies, imports or taxable expenses exceed AED 187,500. The FTA states that the mandatory threshold does not apply to foreign businesses, so non-resident suppliers should check their position separately.

How much is the VAT late payment penalty now?

Since 14 April 2026, unpaid VAT attracts a penalty of 14% per annum, applied monthly from the day after the due date.

Does e-invoicing replace tax invoices?

No. The obligation to issue a tax invoice remains, but a business within the e-invoicing system must issue its tax invoices and tax credit notes as electronic invoices. Businesses with revenue below AED 50 million must be ready by 1 July 2027.

Can I correct a mistake on a VAT return?

Yes. Errors are corrected through a voluntary disclosure. Under the rules in force since 14 April 2026, the penalty is 1% of the tax difference for each month, so correcting early keeps the cost down.

How Indigo Group can help

Indigo Group can help with VAT registration, VAT return filing, voluntary disclosures and the bookkeeping behind them through our Accounting and Audit team. Through our internal audit and CFO services, we can also review your invoicing and reporting processes ahead of your mandatory e-invoicing date. Indigo Group's regulated entity, Indigo Financial Analysis and Consultancy LLC, is licensed by the UAE Capital Market Authority (CMA), licence no. 706042.

Read more about our VAT registration, bookkeeping and accounting services in Dubai.

To talk this through, book a consultation or message us on WhatsApp.

Written by

Alexander Hutton

CEO

Alex Hutton is the CEO of Indigo Group, where he oversees the company's strategic direction and global operations.

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Last reviewed 27 October 2026. This article is for general information only and does not constitute financial, legal or tax advice. Rules change, so please speak to a qualified adviser about your circumstances.

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