UAE VAT, introduced on 1 January 2018, requires businesses to register once their taxable supplies and imports exceed specified thresholds within a 12-month period. Mandatory registration applies once taxable supplies and imports exceed AED 375,000 in the preceding 12 months, or are expected to exceed that threshold in the next 30 days. Voluntary registration is available once taxable supplies, imports, or taxable expenses exceed AED 187,500 (half the mandatory threshold), letting smaller or newly-established businesses register early, often to be able to recover VAT on startup costs before crossing the mandatory threshold. Once registered, a business must charge VAT (currently 5%, the standard UAE rate) on its taxable supplies, file VAT returns (generally quarterly, though some larger businesses file monthly), and can recover VAT paid on its own business purchases as input tax, similar in concept to India's GST Input Tax Credit mechanism. Failing to register once the mandatory threshold is crossed carries real penalties, so tracking rolling 12-month turnover against the threshold is a standard ongoing compliance task, not a one-time check.
Example: A Dubai-based consulting firm's taxable supplies reach AED 380,000 over the trailing 12 months. Having crossed the AED 375,000 mandatory threshold, it must register for VAT and begin charging 5% VAT on its services.
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