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Three concepts form the core of daily VAT compliance for any UAE business. These include, knowing how to value a supply correctly, identifying when a transaction becomes a deemed supply, and understanding when the VAT obligation actually arises. In addition to these are VAT rules that determine who must pay the tax, completing the operational foundation of the UAE VAT system.
These factors affect how businesses price transactions, when they account for output tax, whether they can recover input tax on goods and services they no longer hold, and what triggers a registration or deregistration obligation with the Federal Tax Authority (FTA). If they get any of these wrong, they face consequences such as under-declared VAT, unrecoverable input tax, or heavy penalties.
This blog explains the important updates introduced by Cabinet Decision No. 100 of 2024 to the VAT Executive Regulations. It covers changes to deemed supply rules, registration processes, and valuation methods in a simple and easy-to-understand way.
The value of a supply is the amount on which VAT is calculated. It is not always simply the invoice amount. The rules vary depending on the nature of the consideration and the relationship between the parties.
Where payment is in cash or its equivalent, the value of the supply is the amount received, excluding VAT itself.
Where part or all of the consideration is non-monetary, for example, in a barter arrangement, the value of supply is the monetary amount received plus the market value of the non-monetary element, excluding VAT. FTA Public Clarification VATP042, issued April 2025, specifically confirmed that barter transactions carry the same VAT treatment as supplies made for monetary consideration.
Where a discount is agreed and applied before the date of supply, the value of supply is the net amount after discount. The discount must be genuine and reflected in the transaction at the time of supply, not applied retrospectively.
When a supply occurs between related parties, such as a parent company and its subsidiary outside a VAT group, the supply’s value is determined by the open market value at the time of the transaction. This prevents artificial undervaluation between connected parties.
For imported goods, the value of supply includes the cost of the goods, insurance, freight, customs duty, and excise duty. All these elements form part of the taxable base on which 5% VAT is applied.
For deemed supplies, the value is either the supply’s replacement cost or the actual cost of acquiring it. Cabinet Decision No. 100 of 2024 clarified how these values are determined for deemed supply purposes, particularly in relation to gifts and assets held at the time of deregistration.
A deemed supply arises when goods or services are disposed of or used in a way that falls outside the normal course of taxable business activity, even where no consideration is received. The FTA treats these as taxable events to prevent businesses from recovering input tax on goods that ultimately leave the business without being used to make taxable supplies.
Under the UAE VAT law, a deemed supply arises in two main situations:
Not every internal disposal or gift creates a VAT obligation. The following are specifically excluded from deemed supply treatment:
Under the Cabinet Decision No. 100 of 2024, the following is the new stance regarding the gift threshold rules:
VAT registration is the formal process by which a business obtains a Tax Registration Number (TRN) from the FTA. It also makes the business obligated or entitled to charge and recover VAT. Registration rules differ depending on whether the business is UAE-resident.
A business must register for VAT when its taxable turnover exceeds AED 375,000, assessed using either of two tests:
| Test | What it measures |
|---|---|
| Historic Test | Taxable turnover over the preceding 12 months |
| Future Test | Expected taxable turnover in the next 30 days |
Note: If the business crosses any of these thresholds, then it needs to register itself within thirty days of crossing the threshold. If the business fails to get itself registered, then it will be liable to pay a fixed amount of penalty of AED 10,000 and VAT as well on supplies after threshold is crossed.
The tax shall become chargeable starting on the first day of the month following the month in which the threshold is reached.
Exempt supplies are excluded from the calculation. Taxable imports of goods and services on which the importer is liable to account for VAT are also included.
One exception applies: a business that makes exclusively zero-rated supplies may apply to the FTA for an exemption from mandatory registration. This is relevant for exporters and certain healthcare or education providers whose entire output is zero-rated.
A company that earns income from its taxable sales beyond AED 187,500 but less than AED 375,000 can choose to register. The decision carries both advantages and disadvantages:
| Advantages | Disadvantages |
|---|---|
| Input VAT on purchase is recoverable | Output VAT must be charged, making supplies more expensive for end consumers who cannot recover VAT |
| Avoids penalties if the mandatory threshold is approached | Administrative and compliance burden increases |
| Enhances business credibility with larger counterparties | Voluntary registrants must remain registered for at least 12 months before applying to deregister |
Neither the mandatory nor the voluntary thresholds will apply to businesses not established in a GCC Implementing State. In cases where no other registered person is required to pay the VAT due for the business through the reverse charge process, the non-established business will be required to register for VAT in the UAE from the day it makes any taxable supply.
Deregistration cancels a business’s VAT registration with the FTA. It is either triggered by a change in business circumstances or chosen voluntarily.
The following conditions will require an entity to register for deregistration in 20 working days:
Deregistration takes effect from the last day of the tax period in which the FTA is satisfied that the conditions are met.
The company that is voluntarily registered may apply to deregister after being registered for at least 12 months, subject to the condition that taxable supplies made in the previous 12 months have not exceeded AED 375,000. Deregistration becomes effective as from either of the two dates, whichever comes later. The FTA may decline a voluntary deregistration application if it considers continued registration to be in the public interest.
The time of supply, also called the tax point, is the date on which a VAT transaction is recognised for reporting purposes. It determines which VAT return period the transaction falls under. Reporting a supply in the wrong period, even with the correct VAT amount, can trigger penalties.
Under the UAE VAT framework, there are two types of tax points: the Basic Tax Point (BTP) and the Actual Tax Point.
The BTP varies depending on the type of supply:
| Type of Supply | Basic Tax Point |
|---|---|
| Goods (dispatched or delivered) | Date of dispatch or removal from stock |
| Services | Date of performance or completion |
| Goods on sale or return basis | Date the customer adopts the goods, or 12 months from date of dispatch (whichever is earlier) |
| Assembly and installation contracts | Date of completion of assembly or installation |
| Continuous services | Date of issuance of the tax invoice |
The Actual Tax Point is the earlier of:
In practice, whichever of these three events occurs first becomes the tax point for that transaction. This means that if a business issues an invoice or receives a deposit before goods are dispatched or services are completed, the VAT obligation arises at that earlier point not at the BTP. Companies with long lead times between booking and delivery should be careful about this, since misreporting their VAT periods can be problematic for them.
Under Article 25 of Federal Decree-Law No. 8 of 2017, tax invoices should be issued within 14 days from the date of supply.
Once registered, a taxable person carries four core obligations under UAE VAT law:
Proper valuation of goods, recognising when supplies are deemed to occur, registration, and the correct tax period in which VAT should be calculated are among the interrelated tasks that each entity must perform to comply with the regulations set out by the UAE regarding VAT.
The regulations are not set in stone, since Cabinet decisions have changed many aspects of the process, including thresholds for deemed supplies and valuations of gifts and other non-monetary transactions. With the FTA’s Emara Tax system centralising all registration, filing, and enforcement activities, and e-invoicing set to roll out from July 2026, the marginal error is now narrowing down.
For businesses already registered, keeping tax point records and deemed-supply positions aligned with the updated 2024 rules is a straightforward but important compliance priority.
