Aqid ERPThe rate, and what is zero-rated or exempt
VAT is 5% on taxable supplies and imports (Federal Decree-Law No. 8 of 2017, Article 3). Some supplies are zero-rated: taxed at 0%, so the supplier still recovers the VAT on its costs. Others are exempt: no VAT is charged, and the VAT on the costs behind them cannot be recovered.
- Zero-rated (Article 45): exports outside the GCC implementing states; international transport of passengers and goods; certain means of transport; investment-grade gold, silver and platinum (99% purity or more); the first supply of a residential building within three years of completion; qualifying education and healthcare; crude oil and natural gas.
- Exempt (Article 46): certain financial services not paid for by an explicit fee; residential property other than the zero-rated first supply; bare land; local passenger transport. Since 15 November 2024 (Cabinet Decision No. 100 of 2024), also transfers and custody of virtual assets, and the management of licensed investment funds.
Who must register
Registration is mandatory when taxable supplies and imports exceeded AED 375,000 over the past 12 months, or are expected to exceed it in the next 30 days. The application is due within 30 days of crossing it. Zero-rated sales count towards the threshold; exempt sales do not.
Registration is voluntary from AED 187,500, a test that also counts taxable expenses. A business whose supplies are all zero-rated may ask the FTA for an exception from registration.
| Mandatory registration | over AED 375,000 |
|---|---|
| Voluntary registration | over AED 187,500 |
| Apply within | 30 days of crossing the mandatory threshold |
| Penalty for registering late | AED 10,000 |
Returns and payment
The standard tax period is a quarter; the FTA assigns monthly periods to large businesses, in practice those with turnover of AED 150 million or more. The return and the VAT due must both reach the FTA by the 28th day after the period ends. A due date on a weekend or public holiday moves to the next working day.
Tax invoices are issued within 14 days of the supply, and records are kept for five years after the end of the tax period they relate to (fifteen for real estate).
What changed on 1 January 2026
Federal Decree-Law No. 16 of 2025 amended the VAT law from 1 January 2026. The Ministry of Finance lists three changes:
- No more self-invoices under the reverse charge. A business accounting for VAT on an import of services, for example, no longer issues an invoice to itself; it keeps the supplier's documents instead.
- A five-year limit on reclaiming excess refundable tax. After five years the right to the refund lapses.
- Input tax can be refused where the FTA finds the supply was part of a tax-evasion arrangement, so a business is expected to check that its suppliers' supplies are genuine before it recovers the VAT on them.
Old refunds: file by 31 December 2026
A companion amendment to the Tax Procedures Law (Federal Decree-Law No. 17 of 2025) caps refund requests at five years from the end of the tax period. Where that five years had already run out before 1 January 2026, or runs out within a year of it, the refund can still be requested until 31 December 2026. A business with an old credit balance at the FTA should look at it now.
The penalties in force since 14 April 2026
Cabinet Decision No. 129 of 2025 amended the penalty table (Cabinet Decision No. 40 of 2017) from 14 April 2026. The biggest change is late payment: the old 2% and 4% charges and the daily 1%, capped at 300%, are replaced by a monthly penalty worked out at 14% a year on the unpaid tax.
| Late payment | 14% a year, charged for each month or part of a month |
|---|---|
| Late return | AED 1,000; AED 2,000 if repeated within 24 months |
| Incorrect return | AED 500; none if corrected before the due date |
| Error disclosed voluntarily before an audit notice | 1% a month on the tax difference |
| Error found after an audit notice | 15% of the difference plus 1% a month |
| Late registration | AED 10,000 |
| Late deregistration | AED 1,000 a month, up to AED 10,000 |
Voluntary disclosure pays
The table rewards finding your own mistakes. An error disclosed before the FTA announces an audit costs 1% a month on the tax difference and no fixed percentage; the same error found after the notice costs a fixed 15% on top. And no late-payment penalty applies to a disclosure's tax if it is paid within 20 business days of the disclosure.
E-invoicing: the next deadline is 30 October 2026
Businesses with revenue of AED 50 million or more must appoint an accredited service provider by 30 October 2026 (moved from 31 July by Ministerial Decision No. 66 of 2026) and issue e-invoices from 1 January 2027. Those below AED 50 million appoint one by 31 March 2027 and start on 1 July 2027; government entities start on 1 October 2027. Missing either deadline costs AED 5,000 a month (Cabinet Decision No. 106 of 2025).
Where Aqid ERP fits
Aqid ERP prepares the VAT 201 return from the books, box by box, with each figure traced to its invoices, and posts reverse-charge VAT on both sides of the entry without any self-invoice. It produces each e-invoice as PINT AE XML; it is not itself an accredited service provider, and its connection to providers is being built, so until then you hand the XML to yours.