Value Added Tax (VAT) is a tax placed on most goods and services sold in the United Arab Emirates (UAE). It was introduced across the country on 1 January 2018 and is managed by the Federal Tax Authority (FTA). In 2025, VAT remains a key part of the UAE’s plan to reduce reliance on oil and create new sources of income for the government. Major contributors to the economy, such as ADNOC and other large entities, operate within this broader national strategy.

For businesses in Abu Dhabi, understanding and following VAT rules is important. Companies that meet the required income level must register for VAT. This allows the government to track tax collected from sales and ensure the business is meeting its legal duties. Many companies choose to work with local PRO service providers to simplify the process, especially when it comes to handling permits, licences, and official documentation required for registration.

What is VAT and Is It Applicable in Abu Dhabi

VAT is a tax added to the sale price of goods and services. It is charged at each step of the supply chain, from the manufacturer to the final customer. Businesses collect VAT from their customers and then pay it to the government.

In the UAE, VAT is applied at the federal level. This means the rules are the same across all emirates, including Abu Dhabi. There is no local VAT system in Abu Dhabi. The tax is controlled by the Federal Tax Authority (FTA), which makes sure that businesses across the UAE follow the same VAT laws.

The VAT law is based on two main laws:

1. Federal Decree-Law No. 8 of 2017 on Value Added Tax – this law explains how VAT works in the UAE.

2. Federal Law No. 7 of 2017 on Tax Procedures – this law sets the rules for tax registration, filing returns, paying tax, and penalties.

VAT in Abu Dhabi is therefore not a separate system. It is part of the UAE’s overall VAT system. All businesses operating in Abu Dhabi must follow the same federal VAT rules as those in other emirates.

Registration Requirements for Businesses in Abu Dhabi

In the UAE, not all businesses need to register for VAT. Whether a business must register depends mainly on its total taxable turnover in the past 12 months or expected in the next 30 days. Taxable turnover includes the value of goods and services sold that are subject to VAT, including zero-rated supplies but not exempt supplies.

There are two main types of VAT registration: mandatory and voluntary.

Mandatory VAT Registration

A business must register for VAT if its taxable turnover is more than AED 375,000 in the last 12 months or expected to pass this amount in the next 30 days. This rule applies to businesses across all emirates, including Abu Dhabi.

This means that once a business reaches this amount, it must apply for VAT registration with the Federal Tax Authority (FTA). If a business fails to register on time, it may face fines and other penalties.

Voluntary VAT Registration

A business can choose to register for VAT even if its taxable turnover is below AED 375,000 but above AED 187,500. This is called voluntary registration. It is often used by smaller businesses that want to claim back VAT they paid on their business expenses.

For example, a business in Abu Dhabi with a turnover of AED 200,000 may register for VAT even though it is not required. This can help improve its image with other registered businesses and allow it to recover input VAT.

Exempt from VAT Registration

If a business's taxable turnover is below AED 187,500, it cannot register for VAT. This applies even if the business wants to register. However, the business must still keep proper records in case its turnover increases in the future and it becomes eligible.

Step-by-Step Guide to Registering for VAT in Abu Dhabi

Businesses that meet the VAT registration requirements must apply through the Federal Tax Authority (FTA). The entire process is done online through the FTA’s official website.

Here is a simple step-by-step guide:

Step 1. Create an FTA Account

Go to the FTA website: www.tax.gov.ae
Click on “Sign up” to create an e-Services account.
Provide a valid email address and mobile number to receive verification codes.
After signing up, log in to your account to begin the registration process.

Step 2. Complete the VAT Registration Form

Once logged in, choose “VAT” and click on “Register for VAT.” The form has several sections that ask for the following details:

• Business name (legal and trade name)

• Business activities

• Contact information (address, phone, email)

• Trade licence details

• Bank account information

• Estimated turnover and import/export activities

• Details of business owners or partners

Make sure all the information is correct and matches the trade licence.

Step 3. Upload Required Documents

You will need to upload copies of the following documents:

• Trade licence

• Emirates ID and passport of the owner or authorised signatory

• Proof of business address (such as tenancy contract or utility bill)

• Financial records (invoices, contracts, or sales reports to prove turnover)

• Bank account details (IBAN confirmation)

All files must be clear and in PDF, JPG or PNG format.

Step 4. Submit the Application

After filling in the form and uploading all documents, review your application carefully. Submit the application through the portal. You will receive a confirmation by email.

Step 5. Receive the TRN (Tax Registration Number)

If the application is approved, the FTA will issue a TRN, a unique 15-digit number for your business. This number must be included on all VAT invoices and other tax documents.

VAT Registration Costs in the UAE

Registering for VAT with the Federal Tax Authority (FTA) is free of charge. There are no government fees for submitting a VAT registration application through the FTA’s online portal.

However, businesses may still face some indirect costs related to VAT registration and ongoing compliance. These can include:

1. Professional Services

Some businesses choose to hire tax consultants or accounting firms to handle their VAT registration and filings. The cost of these services varies based on the size and type of the business, and the level of support needed.

2. Accounting Software

To manage VAT correctly, businesses often need accounting software that can generate VAT-compliant invoices and reports. The price depends on the software provider and the features included.

3. Staff Training

Businesses may need to train staff to understand how VAT works and how to apply it correctly to their daily operations. This can include training in areas such as issuing tax invoices, keeping records, and filing VAT returns.

While the VAT registration itself is free, it is important for businesses to plan for these possible costs to stay compliant and avoid mistakes.

Verification of VAT-Registered Companies

Before doing business with another company in the UAE, it is important to check if that company is registered for VAT. This helps ensure that the Tax Registration Number (TRN) they give you is valid and correct.

The Federal Tax Authority (FTA) provides an online tool to check this information.

How to Verify a TRN

1. Go to the official FTA website: www.tax.gov.ae

2. Click on “TRN Verification” under the e-Services menu

3. Enter the TRN number provided by the other company

4. Click “Validate”

If the TRN is correct and active, the system will show the legal name of the business. If it is not valid, an error message will appear.

Why Verification Is Important

• It confirms that the business is legally registered for VAT

• It helps prevent fraud or use of fake TRNs

• It ensures that you can claim input VAT on your purchases if required

Businesses in Abu Dhabi and across the UAE should always verify a TRN before accepting a tax invoice or entering into large transactions.

VAT Rates in 2025

In 2025, the standard VAT rate in the UAE remains at 5%, and this applies across all emirates, including Abu Dhabi. Most goods and services fall under this rate. However, the UAE VAT system also includes zero-rated and exempt categories. While all three are treated differently, only standard-rated and zero-rated supplies allow a business to claim back the VAT it has paid on its purchases (input VAT). Exempt supplies do not allow for input VAT recovery.

Standard-rated supplies are taxed at 5%. Businesses that sell these items must add VAT to their invoices and submit it to the Federal Tax Authority (FTA). Common examples include electronics, food in restaurants, hotel services, and professional consulting services.

Zero-rated supplies are taxed at 0%. While no VAT is charged to the customer, the business can still claim input VAT on costs linked to these sales. Zero-rated supplies include exports outside the GCC, international transport services, specific education and healthcare services, and the first sale of newly built residential property within three years of completion.

Exempt supplies are not taxed at all, and businesses that only provide exempt goods or services cannot register for VAT or recover input VAT. Common exempt items include local passenger transport (such as buses and taxis), residential rentals (except the first supply), bare land, and life insurance.

To help understand the differences, the table below provides a simple summary:

Exemptions and Special Categories

Not all goods and services in the UAE are subject to VAT. Some are considered exempt, and others fall under zero-rated categories. Although both are taxed at 0%, they are treated differently under UAE VAT law.

Exempt supplies are not subject to VAT, and businesses that supply only exempt goods or services cannot register for VAT. They also cannot claim input VAT on any of their business expenses. This affects how they manage their costs and pricing.

In contrast, zero-rated supplies are also taxed at 0%, but the supplier is still allowed to recover input VAT on costs related to those sales. This makes a major difference in how these businesses manage cash flow and compliance.

In Abu Dhabi and the rest of the UAE, exempt supplies include the following:

• Residential rental properties (excluding the first supply of a new building)

• Local passenger transport (such as buses, taxis, and the metro)

• Bare land (plots without any buildings or infrastructure)

• Certain types of life insurance

Zero-rated supplies include:

• Exports of goods and services to countries outside the GCC

• International transport (air and sea freight)

• Certain educational and healthcare services (when provided by approved institutions)

• The first sale of newly built residential property (within 3 years of completion)

Understanding these categories is important because it affects a business’s VAT registration, reporting, and ability to claim back tax paid on purchases.

Comparison of VAT-Exempt and Zero-Rated Categories