UAE VAT Explained: 5% Rate, Exemptions & Business Compliance

Comprehensive guide to the 5% Value Added Tax in the UAE, zero-rated goods, and tax registration thresholds.

SmartUAE Financial Utilities DeskTax, Salary & Cost of Living Research Desk

Last Updated: 2026-08-09 Reviewed: 7 min read

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The Mechanics of 5% Value Added Tax in the UAE

Introduced in January 2018 under Federal Decree-Law No. 8 of 2017, the United Arab Emirates applies a standard 5% Value Added Tax (VAT) on the supply of most goods and commercial services at each stage of the supply chain.

Standard Rated vs. Zero-Rated vs. Exempt Supplies

Tax Treatment	VAT Rate	Examples of Supplies
Standard Rated	5%	Electronics, dining, hotels, retail apparel, commercial leases, fuel
Zero-Rated (0%)	0%	Exported goods/services, international transport, investment gold, basic education
Exempt Supplies	No VAT	Residential property leases, local passenger transport (taxis/metro), bare land

How to Compute VAT on Invoices

To calculate tax-inclusive price from net cost: Gross Price = Net Cost × 1.05

To extract the net cost from a tax-inclusive total: Net Cost = Gross Price ÷ 1.05

To extract the exact VAT component: VAT = Gross Price - (Gross Price ÷ 1.05)

Source-Reviewed References & Authoritative Sources

Federal Tax Authority (FTA) (UAE Federal Tax Authority) ↗

Federal tax administration overseeing 5% Value Added Tax (VAT) executive regulations, tax invoices, zero-rating, and corporate tax guidelines.

SmartUAE Financial Utilities Desk

Tax, Salary & Cost of Living Research Desk

The Financial Utilities Desk develops mathematical models for UAE payroll breakdowns, Federal Tax Authority (FTA) 5% VAT calculations, mandatory ILOE insurance categories, and Emirate-level cost of living benchmarks.