The two thresholds
| Threshold | Amount | What it means |
|---|---|---|
| Mandatory registration | AED 375,000 | You must register if taxable supplies and imports over the previous 12 months exceed this, or you expect to exceed it in the next 30 days. |
| Voluntary registration | AED 187,500 | You may register if taxable supplies and imports, or taxable expenses, exceed this over the previous 12 months or in the next 30 days. |
Both figures are set by Federal Decree-Law No. 8 of 2017 and have not changed since VAT began in 2018. They apply per taxable person, so a sole establishment and a separate LLC owned by the same individual are measured separately.
What counts toward the threshold
The test is taxable supplies and imports, not profit and not total revenue. Taxable supplies include standard-rated (5%) and zero-rated (0%) sales of goods and services, plus reverse-charged purchases from abroad. Exempt supplies, such as residential rent or certain financial services, do not count.
Two points trip people up. First, zero-rated exports count even though no VAT is charged on them, so an export-heavy business can be required to register while collecting nothing. Second, the 12-month window is rolling, not your financial year. You have to be able to see the trailing 12-month total at any moment.
The 30-day forward test
You also have to register if you anticipate crossing AED 375,000 within the next 30 days. Signing a single large contract can trigger this before the historical total gets anywhere near the line. Once you are required to register, the application must be submitted within 30 days.
What happens if you register late
Late registration carries an administrative penalty of AED 10,000. Worse, you are liable for the VAT you should have charged from the date you were required to register, whether or not you can recover it from your customers. For a service business that means 5% of turnover comes out of your margin.
Should you register voluntarily?
Registering early makes sense when your customers are mostly VAT-registered businesses (they recover the VAT you charge, so it costs them nothing) and you have meaningful input VAT to recover on your own costs. It makes less sense when you sell to consumers, because a 5% price increase is real to them and the compliance load is the same either way. Once registered you must file every period and stay registered until your turnover falls below the voluntary threshold.
After you register
- Put your TRN on every invoice and switch to proper tax invoices from the effective date on your certificate.
- Set up your tax periods and their 28-day deadlines. See how to file the VAT 201.
- Start keeping supplier tax invoices for everything you intend to recover VAT on.
- Check whether any of your customers are outside the UAE or in a designated zone, because those sales may be zero-rated.
Frequently asked questions
Is the threshold based on profit?
No. It is based on the value of taxable supplies and imports over a rolling 12 months, regardless of profit.
Do free zone companies have to register for VAT?
Yes, on the same thresholds. Being in a free zone, even a designated zone, does not exempt a business from VAT registration.
I am a freelancer with a permit. Does this apply to me?
Yes. A natural person carrying on a business is a taxable person and the same AED 375,000 test applies.
Can I deregister if turnover falls?
You must deregister if taxable supplies stop entirely, and you may apply to deregister if the trailing 12-month total falls below AED 187,500.
Sources
This guide is general information for UAE small businesses, not tax or legal advice. Rates, thresholds and deadlines are checked against Federal Tax Authority and Ministry of Finance publications on the date above, but the rules change. Confirm anything that matters with the FTA or a registered tax agent.