VAT in the UAE: Practical Guidance for SMEs
Value Added Tax (VAT) has been part of doing business in the UAE since 2018. For SMEs, staying compliant isn’t just about avoiding penalties — it’s about keeping operations smooth and maintaining credibility with clients, banks, and regulators.
Who Needs to Register?
Mandatory: If your taxable turnover (including imports) exceeds AED 375,000 over the past 12 months or is expected to do so in the next 30 days.
Voluntary: If you pass AED 187,500 in either taxable turnover or expenses, you may register voluntarily — often useful for startups with plans to grow or reclaim input VAT.
Key VAT Concepts for SMEs
Standard-rated (5%): Applies to most goods and services.
Zero-rated (0%): Applies to certain exports, education, and healthcare services.
Exempt: Includes some financial services and residential real estate (with conditions).
Applying the correct VAT treatment to your sales and purchases is critical. Mistakes here are one of the most common triggers for audits and penalties.
Common Issues We See
Charging VAT incorrectly — especially in service sectors or when dealing with international clients
Missing VAT return deadlines (usually quarterly)
Overclaiming input VAT on non-eligible expenses like staff entertainment or personal use
Misunderstanding Free Zone rules — not all Free Zones are Designated Zones, and most services are still subject to VAT
What’s New?
The FTA has stepped up enforcement in recent months, especially around professional services, online sales, and real estate. Record-keeping is under scrutiny, and businesses without proper documentation or logic behind their VAT treatment are more likely to face penalties.
Need Help?
We support SMEs with a wide range of VAT matters—from registration and accurate filing to resolving disputes with the FTA. Our services also include advising on transaction structuring, reviewing contracts for VAT implications, and managing compliance in Free Zones and cross-border scenarios.
Our guidance is clear, practical, and tailored to help you stay compliant and avoid costly issues down the line.
