Voluntary VAT registration in the UAE: reclaiming VAT on start-up costs
A new UAE company that has paid VAT on set-up costs may be able to register voluntarily and reclaim it. Who qualifies, what can be recovered, and the obligations that come with registration.
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- When can a UAE business register for VAT voluntarily?
- When its taxable supplies or taxable expenses exceeded AED 187,500 in the previous 12 months, or are expected to exceed it in the next 30 days. Because expenses count, a new business can qualify on its set-up costs.
- Can VAT paid before registration be reclaimed?
- Generally yes, in the first VAT return, where the goods and services are used to make taxable supplies and you hold valid tax invoices — but not on services received more than five years before registration, or the depreciated part of an asset's cost.
- What does voluntary registration commit me to?
- Charging VAT on taxable sales, issuing valid tax invoices, filing a VAT return every tax period even with no sales, and keeping records for at least five years.
New companies often pay VAT on fit-out, equipment, software and professional fees long before their first sale. If the business is not registered for VAT, that VAT is simply a cost. Voluntary registration can change that — but it brings obligations of its own.
Who can register voluntarily
| Voluntary registration | Taxable supplies or taxable expenses above AED 187,500 in the previous 12 months, or expected to exceed it in the next 30 days |
| Mandatory registration | Taxable supplies and imports above AED 375,000 in the previous 12 months, or expected in the next 30 days |
Because taxable expenses count, a new business can qualify on its set-up costs before it has made a sale.
How we help: VAT registration — the right date and route, filed on EmaraTax.
What VAT can be recovered
- VAT paid on goods and services received before registration can generally be recovered in the first VAT return, where they are used to make taxable supplies.
- It cannot be recovered on services received more than five years before registration, or on the part of an asset's cost already depreciated before registration.
- Recovery needs valid tax invoices in the company's name — keep them from day one.
- VAT on costs that relate to exempt supplies cannot be recovered.
What registration brings with it
- VAT at 5% on your taxable sales, and tax invoices that meet the FTA's requirements — see what a valid tax invoice shows.
- A VAT return for every tax period, usually quarterly, by the 28th day after the period ends — even when there were no sales. A late return costs AED 1,000, or AED 2,000 for a repeat within 24 months.
- Records kept for at least five years.
When it tends to make sense
- Your customers are VAT-registered businesses, which can usually recover the VAT you charge them.
- Your sales will be zero-rated exports, so you charge 0% but recover VAT on your costs.
- You have paid significant VAT on set-up costs and expect to cross the mandatory threshold anyway.
It deserves more thought where most customers are consumers who cannot recover VAT, or where the VAT on costs is small compared with the cost of quarterly compliance.
Making the claim
Gather the tax invoices for every pre-registration cost, check each one is in the company's name and linked to the business, and include the claim in the first return. Our fee for VAT registration is AED 499*, and quarterly VAT returns start from AED 499* a quarter — our published introductory fees at the date of this article. See what VAT registration costs, or ask us whether voluntary registration suits your business.
* Our fixed fees apply to businesses with annual revenue up to AED 3 million; above that, we prepare a custom quote. They do not apply to businesses dealing in digital currencies (crypto or other virtual assets), which are quoted separately.