What Is the VAT Threshold in UAE?

In the UAE, VAT registration thresholds determine whether a business is required—or allowed—to register with the Federal Tax Authority (FTA) for VAT purposes.

As of 2025, the UAE VAT system includes:

• A Mandatory Registration Threshold of AED 375,000
• A Voluntary Registration Threshold of AED 187,500

 

Mandatory VAT Registration (AED 375,000)

 

You must register for VAT if:

• Your taxable turnover (sales + other taxable supplies) exceeds AED 375,000 in the past 12 months, or
• You expect to exceed AED 375,000 in the next 30 days

Note: This threshold applies only to UAE-established businesses. Foreign businesses with taxable activities in the UAE must register immediately, regardless of threshold.

 

Voluntary VAT Registration (AED 187,500)

 

You can choose to register for VAT voluntarily if:

• Your taxable turnover or taxable expenses exceed AED 187,500 in the past 12 months

Voluntary registration is common for:

• Startups in early stages
• Freelancers or consultants
• E-commerce businesses expecting growth
• Businesses that want to reclaim input VAT

 

What Is Considered Taxable Turnover?

Taxable turnover includes:

• Standard-rated supplies (5%)
• Zero-rated supplies (0%)
• Reverse charge services
• Exported goods/services
• Supplies within the UAE and designated zones

 

Exempt supplies (e.g., residential rent, local passenger transport) are not included in the threshold calculation.

 

Mandatory vs Voluntary VAT Registration – Summary

Feature	Mandatory	Voluntary
Threshold	AED 375,000	AED 187,500
Input VAT Recovery	✅ Yes	✅ Yes
FTA Registration Required	✅ Must register	✅ Optional
Typical Users	Established businesses	Startups, freelancers, new traders
Impact on Compliance	Full VAT obligations apply	Full VAT obligations apply

 

What If You Don’t Register on Time?

Late VAT registration leads to:

• AED 10,000 administrative penalty
• Backdated VAT liabilities
• Potential audits and fines

FTA tracks your revenue via:

• Tax returns
• Bank data
• Customs declarations
• Invoices and public listings

 

Benefits of Voluntary VAT Registration

• Build credibility with clients and vendors
• Reclaim input VAT on setup and running costs
• Avoid future penalties by registering early
• Position for growth in B2B markets that require VAT-compliant partners

 

When Should You Apply?

• As soon as your forecasted sales approach the voluntary threshold
• Before signing long-term contracts that include VAT
• If you want to import/export or sell to VAT-registered businesses

 

Most Searched FAQs (2025)

Q: What if my revenue goes above the threshold temporarily?
A: If it exceeds AED 375,000—even for a short time—you must register.

Q: Can I cancel my VAT registration later?
A: Yes, you can deregister if your turnover remains below AED 187,500 for 12 months.

Q: Does VAT apply only to product sales?
A: No, it applies to goods and services, including consulting, software, rent, and digital services.

Q: Is there a penalty for registering voluntarily and then not making taxable supplies?
A: Not if you comply with FTA filing obligations. However, non-compliance can attract penalties.

 

Conclusion

Understanding the UAE VAT thresholds is vital for every business—from startups to established companies. Whether mandatory or voluntary, VAT registration ensures you remain compliant, professional, and eligible for input tax recovery.

 

 

Need Support with VAT Registration?

At Think Biz Management Consultancies, we help you:

• Assess if you’re eligible or required to register
• File accurate VAT registration on the FTA portal
• Forecast revenue and avoid penalties
• Guide you on voluntary registration for startups and freelancers
• Maintain proper compliance post-registration

 

Contact us today for a free consultation.

Let us handle your VAT registration while you focus on growing your business.

Contact us today for a free consultation.

 

 

Contact number: ‪+971 50 983 0334‬

Email ID: info@alphabets.ae