UAE VAT Guide: What Residents Need to Know in 2026

The UAE introduced Value Added Tax (VAT) at 5% on 1 January 2018. While 5% is low by global standards, it applies to most goods and services — and understanding the exemptions can save you money.

How UAE VAT works

VAT is a consumption tax applied at each stage of the supply chain. As a consumer, you pay the final 5% on top of the listed price. Businesses registered for VAT (those with taxable supplies over AED 375,000 per year) collect and remit the tax to the Federal Tax Authority (FTA).

What's taxable at 5%

Most goods and services: electronics, clothing, dining, entertainment, hotel stays, car purchases and repairs, professional services, gym memberships, and most retail purchases. Importantly, gold and diamond jewellery is taxable at 5% — a common misconception is that gold is VAT-free in the UAE.

What's zero-rated (0% VAT but still in the system)

Healthcare and education are zero-rated, meaning providers don't charge VAT but can still reclaim input VAT on their costs. Exports of goods and services outside the GCC are also zero-rated. International air travel is zero-rated, while domestic flights within the UAE are taxable.

Investment-grade precious metals (gold, silver, platinum with purity of 99% or higher) are zero-rated when sold as investment products through authorised dealers. This is different from gold jewellery, which carries the full 5%.

What's exempt (no VAT at all)

Residential property (rent and first sale), local public transport, bare land, and life insurance are exempt. Financial services are partially exempt — bank fees are generally exempt, but some financial products carry VAT.

Groceries and food

Basic food items (fresh produce, staples) are taxable at 5% — the UAE does not zero-rate essential foodstuffs like some countries do. Restaurant meals and food delivery services are also subject to 5% VAT.

Tourist VAT refund

Tourists can claim VAT refunds on eligible purchases above AED 250 made at participating retailers. The refund is processed through the Planet Tax Free system at airports. You need your passport, boarding pass, and original receipts. The refund is approximately 85% of the VAT paid (a processing fee applies).

Impact on personal finance

At 5%, VAT adds AED 600 per year to every AED 12,000 in monthly spending. While this sounds modest, it compounds across all household expenses. Being aware of what's exempt (residential rent, certain financial services) and what's zero-rated (education, healthcare, investment gold) helps you understand the true cost structure of living in the UAE.

Corporate tax (introduced June 2023 at 9% on profits above AED 375,000) is separate from VAT and does not directly affect consumers — it applies to business profits, not consumer purchases.