Understanding UAE VAT (5%): Consumer and Business Guide
A clear guide to the UAE 5% Value Added Tax system: what is taxed, what is exempt or zero-rated, Tourist Tax Refund scheme, and business rules.
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Introduced on 1 January 2018 under Federal Decree-Law No. 8 of 2017, the UAE Value Added Tax (VAT) is set at a standard rate of 5%. As one of the lowest consumption tax rates in the world, VAT helps diversify government revenue while keeping the economy highly competitive.
1. Standard 5% Taxable Categories
Most retail goods and commercial services in the UAE attract standard 5% VAT.
Key Benchmarks & Figures:
- Dining out and food delivery services
- Electronics, clothing, luxury goods, and motor vehicles
- Commercial property leasing and commercial office spaces
- Utility bills (electricity and water from DEWA, SEWA, FEWA)
- Telecom services (e&, du) and hotel accommodations
2. Zero-Rated (0%) Goods and Services
Zero-rated supplies are technically taxable, but the tax rate charged to the consumer is 0%. Businesses can reclaim input VAT incurred on these supplies.
Key Benchmarks & Figures:
- Exports of goods and services outside the GCC implementing states
- International passenger and freight transport
- First supply of residential real estate within 3 years of completion
- Basic healthcare services and preventative medical supplies
- Basic education services (tuition fees for approved curricula)
3. Exempt Supplies (No VAT)
Exempt items carry no VAT, and businesses cannot reclaim input VAT associated with providing them.
Key Benchmarks & Figures:
- Subsequent supplies of residential properties (e.g. residential tenant rent is completely VAT-free)
- Bare undeveloped land
- Local passenger public transport (Dubai Metro, public buses, marine ferries, and licensed taxis)
- Certain life insurance and financial credit products
4. Tourist VAT Refund Scheme (Planet Payment)
Tourists visiting the UAE can reclaim 85% of the VAT paid on purchases made at registered retailers, minus an administrative fee of AED 4.80 per tax-free tag. Validation kiosks are located at all Dubai, Abu Dhabi, and Sharjah international airport departure gates.
Key Benchmarks & Figures:
- Minimum qualifying spend: AED 250 per store.
- Goods must be exported out of the UAE within 90 days of purchase.
Summary & Takeaway
For individual consumers and expats, everyday essential housing rent and public transport remain 100% exempt from VAT, maintaining Dubai’s position as a low-tax haven.
Official Government Citations & References
- Federal Tax Authority (FTA)Official Portal
- Planet Payment UAE Tourist RefundOfficial Portal
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