Fundamentals
What is VAT in Dubai?
Introduced on January 1, 2018 by the UAE government, Value Added Tax (VAT) is administered by the Federal Tax Authority (FTA).
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Background & context
Prior to 2018, Dubai and the Emirates had only no VAT. The introduction of 5% was intended to diversify public revenues beyond oil. The 5% rate is one of the lowest in the world - compared with 20% in France, 21% in Belgium or 7.7% in Switzerland. The competent tax authority is FTA (Federal Tax Authority) - tax.gov.ae.
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Operating principle
As in Europe, VAT is borne by the consumer. end consumer. Registered companies collect VAT on their sales, deduct the VAT paid on their purchases, and pay the difference to the FTA. This Deductible VAT is identical to the European model.
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The 3 VAT regimes in the UAE
5% Standard rate - current goods and services
0% Taux zéro - export, 1st residential sale
EX Exempt - residential rental, health, education
💡 Key distinction: The rate zero (0%) and the’exemption are two different things. At zero rate, VAT is zero, but the seller can reclaim VAT on his purchases (input VAT). Under exemption, no VAT is charged, and the seller cannot recover input VAT. This distinction is crucial for residential property developers.
Rates by sector
Which sectors are subject to VAT in Dubai?
Not all sectors are in the same boat. Here's the full table.
5% Standard rate
▸ Consumer staples
▸ Restaurants, hotels, tourism
▸ Electronics, clothing, luxury
▸ Professional services (consulting, auditing)
▸ Commercial real estate (sales & rentals)
▸ Telecom, internet, energy
▸ Real estate agency commission
▸ Short-term furnished rental
0% Zero interest rate
▸ Exports of goods outside UAE
▸ First sale of a new residential property
▸ First lease of a new home (3 years after completion)
▸ Construction of charitable buildings
▸ International transport (freight & passengers)
▸ Crude oil and by-products (export)
▸ Precious metals (investment)
▸ Tourist VAT refund (at the airport)
EX VAT exempt
▸ Long-term residential rental (+6 months)
▸ Resale of a residential property (secondary market)
▸ Sale of bare land
▸ Health services (doctors, hospitals)
▸ Education (schools)
▸ Financial services (interest margin)
▸ Local passenger transport
▸ Goods in designated areas (merchandise)
Real estate & VAT
VAT on real estate in Dubai: the complete guide
This is the most important topic for French-speaking investors. The residential/commercial distinction is fundamental.
🏠 RESIDENTIAL
Residential real estate - Quasi-exempt
✅ Transactions exempt or 0% :
Resale (secondary market) → Exempt from VAT
Developer's first sale (new/off-plan) → 0% VAT
Long-term rental (+6 months) → Exempt from VAT
Sale of bare land → Exempt from VAT
⚠️ Subject to VAT 5% :
Real estate agency commission
Rental management services
Furnished short-term rental (Airbnb-type)
Renovation / construction services
Bank handling fees (mortgage)
🏢 COMMERCIAL
Commercial real estate - Subject to 5% VAT
📋 Subject to VAT 5% :
Purchase of offices, stores, warehouses
Rental of commercial premises
Off-plan sale of commercial property
Facilities management services
💡 Commercial buyer advantage :
If you are a VAT-registered company, you can recover VAT paid on the purchase of a commercial good via the input VAT recovery mechanism. This means that VAT is not a net cost for businesses.
🏗️ Focus: VAT on off-plan purchases in Dubai
Off-plan residential property
The first sale of a new home is to zero-rate (0%). The buyer pays no VAT. Some programs even offer a VAT refund of 1% for eligible buyers (DLD scheme). The developer can reclaim VAT on construction costs.
Off-plan commercial property
Each payment (payment plan) is subject to 5% of VAT. The VAT-registered professional buyer can deduct this VAT if the good is intended for a taxable activity. VAT is due at the time of each payment, not just on delivery.
3-year rule
The zero-rate applies to first supply of a new residential property in the 3 years after completion. Beyond that point, the resale becomes tax-free (and no longer zero-rated), which changes nothing for the buyer but affects the seller's VAT recovery.
VAT registration
When and how do I register for VAT in Dubai?
4 cases of application depending on your sales and activity.
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1. MANDATORY
AED 375,000+
≈ €93,000 / CHF 100,000 per year
If your sales exceed this threshold over 12 months, or are likely to exceed it within 30 days, registration is mandatory within 20 days. TRN (Tax Registration Number) assigned by the FTA.
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2. VOLUNTEER
AED 187 500+
≈ €46,500 / CHF 50,000 per year
Between 187,500 and 375,000 AED, registration is optional. Benefits: power recover VAT on your business purchases (VAT input) and invoice with VAT for B2B credibility.
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3. EXCEPTION (Export services)
International
Services to non-UAE/CCG countries only
International 100% service companies (excluding UAE and GCC countries). Registration required if sales > 375K AED but no VAT collected or refunded. No quarterly declaration. Reserved for service providers.
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4. EXEMPTION
Special sectors
Health, education, residential real estate
Certain sectors benefit from total exemption. Please note: even if exempt, registration is still required if sales exceed AED 375K. The «VAT exempt» box must be ticked on FTA registration.
📋 How do I register for VAT in Dubai?
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Submit documents
Trade license, passport, bank statements, proof of CA
03
Get TRN
Tax Registration Number - 5 to 10 working days
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Invoicing with VAT
Mandatory information: TRN, VAT amount, date
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Declare quarterly
Declaration and payment within 28 days after the end of the quarter
What's new in 2026
UAE VAT changes - January 1, 2026
The UAE Ministry of Finance has published major amendments to the VAT law, effective from January 1, 2026.
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End of mandatory self-billing
Removal of the obligation to issue a self-invoice for transactions subject to the reverse charge (import of services). Significant administrative simplification for international groups.
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VAT refund period: 5 years
Claims for VAT refunds are now subject to a specific procedure. maximum period of 5 years from the date of the transaction. After that date, all claims are time-barred. Important for real estate companies with recoverable input VAT.
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Enhanced FTA audits
FTA reinforces its controls with a risk-based. The real estate, fintech and e-commerce sectors are particularly targeted. Document retention periods extended to 15 years for certain sectors.
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New penalty regime (April 2026)
From April 2026, the penalty system will be overhauled: a fixed rate of 14% annual on amounts due (vs. 2% immediate + 4% monthly previously). Reduced penalties for voluntary payment and cooperation with FTA.
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Electronic invoicing (e-invoicing)
The UAE is gradually introducing a mandatory electronic billing. Phased deployment from 2026, starting with large companies. SMEs will have a longer transition period.
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Simplified refund for non-residents
New, simplified VAT refund mechanism for non-resident companies having paid VAT to the UAE without being registered. Removal of the minimum threshold of AED 10,000 for recovery claims.
✅ Good news: Despite the reforms, the VAT rate remains 5%. No increase is planned. Speculation about an increase to 7.5% or 10% is unfounded, according to the UAE Ministry of Finance.
Free trade zones
VAT and free zones in Dubai
Free Zones and Designated Zones have distinct VAT rules.
🏭 Free Zone (ordinary free zone)
Companies operating in ordinary free zones (DMCC, DIFC, DAFZA, etc.) are subject to the following regulations same VAT rules as national territory. VAT normally applies to their operations. They must register if their sales exceed AED 375,000.
▸ VAT 5% on local sales
▸ 0% on exports outside WATER
▸ VAT recovery on business purchases
📦 Designated Zone
Designated areas (JAFZA, KIZAD, etc.) are treated as if they were excluding VAT territory for goods. Transfers of goods between designated zones, or between a designated zone and a foreign country, are not subject to VAT. On the other hand services remain taxable at 5%.
▸ Goods: out of VAT scope WATER
▸ Services : VAT 5% normal
▸ Ideal for logistics, storage, transit
🏦 DIFC - Special case
Visit Dubai International Financial Centre follows standard UAE VAT rules for all transactions with the local market. Regulated financial services (interest, dividends, bank margins) remain exempt. Consulting, auditing and professional services are at 5%.
▸ Regulated financial services: exempt
▸ Professional services: 5%
▸ Same FTA registration required
Tourists
VAT refunds for tourists in Dubai
Non-residents can reclaim VAT of 5% on their purchases of goods exported from the UAE.
✅ Conditions of eligibility
1.Non-resident of the UAE (tourist or visitor)
2.Purchases of goods (not services) for export
3.Participating businesses registered with the Tax Free system
4.Minimum purchase: AED 250 per receipt
5.Departure from UAE territory within 90 days of purchase
6.Items consumed in the UAE are non-refundable
🔄 Refund procedure
STEP 1 Request a tag tax-free with every purchase in partner stores
STEP 2 At the airport, present your purchases to the VAT validation terminals (before baggage check-in)
STEP 3 Choose your refund : species (less processing fees) or credit card
DEADLINE 90-day refund from date of purchase - managed by Planet Tax Free
⚠️ Please note: Visit Tourism Dirham Fee (hotel tourist tax, from AED 7 to AED 20/night depending on the standard of the hotel) is distinct from VAT and is non-refundable. This is in addition to the VAT of 5% on overnight stays.
Worldwide comparison
VAT Dubai vs rest of the world
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5%
Dubai / UAE
Residential real estate : 0%
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20%
France
New building: 20% (recoverable)
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20%
United Kingdom
Residential property: exempt
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19%
Germany
Immo: exempt unless option
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21%
Belgium
New building: 21%
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15%
Saudi Arabia
Residential property: exempt
FAQ
Frequently asked questions - VAT in Dubai
What is the VAT rate in Dubai?
The standard rate is 5%. This is one of the lowest rates in the world. Some categories are zero-rated (0%) or totally exempt.
Is buying property in Dubai subject to VAT?
Residential resale properties are exempt. New residential properties are zero-rate (0%). Commercial property is subject to 5%.
What is the minimum turnover for VAT registration in Dubai?
Registration is compulsory from AED 375,000 of annual sales. Voluntary registration is possible from AED 187,500.
Are rents subject to VAT in Dubai?
Long-term residential rents are exempt. Commercial and short-term rentals are subject to 5%.
Can tourists reclaim VAT in Dubai?
Yes, non-resident tourists can reclaim VAT via the tax-free system by validating their purchases at the airport before departure.
What's new for VAT Dubai in 2026?
New features include the abolition of mandatory self-billing, a VAT refund period limited to 5 years, and the gradual roll-out of electronic invoicing.
Do free zone companies pay VAT in Dubai?
Ordinary free zones follow normal VAT rules (5%). Designated zones benefit from a special regime for goods.
Is there VAT on off-plan property in Dubai?
Off-plan residential properties are generally at zero-rate (0%). Commercial off-plan property is subject to 5%.