Taxable supply: what it means in UAE tax.
The meaning of taxable supply under UAE VAT law: how it works, a worked example in AED, common mistakes and the legal references.
A taxable supply is any sale of goods or services for consideration in the course of UAE business that is not exempt, whether at 5% or 0%.
What taxable supply means
A taxable supply is a supply of goods or services made for consideration in the course of business by a person in the UAE, other than an exempt supply. It covers both standard-rated supplies at 5% and zero-rated supplies at 0%.
Three parts of the definition do the work. There must be a supply, meaning goods or services are provided. There must be consideration, meaning something received or expected in return, in money or otherwise. And the supply must be made in the course of business, meaning an activity carried on regularly, on an ongoing basis and independently. Gifts and some internal transfers can still be taxed through the deemed supply rules.
For an SME, the value of taxable supplies decides whether it must register for VAT. It also decides how much input tax it can recover, because input tax is linked to taxable supplies.
How it works
- VAT is charged on every taxable supply and deemed supply made by a taxable person.
- Standard-rated and zero-rated supplies are both taxable; exempt supplies are not.
- Taxable supplies, together with certain imported goods and services, are added up to test the registration thresholds.
- Registration is mandatory where that total exceeded AED 375,000 over the previous 12 months, or is expected to exceed it in the next 30 days.
- Voluntary registration is possible where taxable supplies or taxable expenses exceed AED 187,500.
Worked example
A small events company that is not yet registered for VAT reviews its last 12 months of sales.
| Standard-rated event services | AED 300,000 |
| Zero-rated services to overseas clients | AED 100,000 |
| Exempt income | AED 50,000 |
| Taxable supplies for the threshold test | AED 400,000 |
| Mandatory registration threshold | AED 375,000 |
Taxable supplies of AED 400,000 exceed the threshold, so the company must apply to register within 30 days.
Common mistakes
- Leaving zero-rated sales out when testing the registration threshold.
- Counting exempt income, which does not count towards the threshold, and registering too early.
- Assuming a supply without payment is never taxable, when the deemed supply rules may apply.
The law
- Federal Decree-Law No. 8 of 2017 on Value Added Tax, Article 1 (definitions of Taxable Supply, Consideration and Business), Articles 2, 3, 13 and 19
- Cabinet Decision No. 52 of 2017 (Executive Regulation of the VAT law), Articles 7 and 8
Frequently asked questions
Is a supply between two UAE branches of the same company a taxable supply?
Branches of one legal person are the same person, so there is generally no supply between them. Separate companies are different persons unless they are in the same VAT group.
Does a one-off sale count as a taxable supply?
It depends on whether it is made in the course of business. The sale of a business asset by a registered business is normally taxable, even if it happens only once.
Related terms
Zero-rated supply · Exempt supply · Deemed supply · VAT registration threshold · Output tax. See every term in the UAE tax glossary.
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