AED 375,000 appears in two completely separate places in UAE tax, which is unfortunate. In corporate tax it is a profit allowance taxed at 0%. In VAT it is the mandatory registration threshold — and it is measured on turnover, not profit, over a rolling window rather than a financial year.
Getting the second one wrong is expensive, because the obligation to register is triggered by a date you may not notice passing.
The two thresholds
- AED 375,000 — mandatory. Once your taxable supplies and imports exceed this, you must register.
- AED 187,500 — voluntary. Above this you may register if you want to, typically to reclaim input VAT.
The part that catches people: it is a rolling test
The threshold is not assessed against your financial year. There are two tests, and either one triggers the obligation:
- Looking back: your taxable supplies over the previous 12 months exceeded AED 375,000
- Looking forward: you expect to exceed AED 375,000 in the next 30 days
The forward-looking test is the one businesses miss. Sign a contract in March that will take you past the threshold within the month, and the obligation is triggered in March — not at your year-end, and not when the invoice is eventually paid.
The backward-looking test is a rolling 12 months, so it can be crossed in any month of the year. A business that does AED 30,000 a month steadily crosses it somewhere in month 13, quietly, with nothing in the accounting system flagging it.
What counts toward the threshold
Taxable supplies means standard-rated and zero-rated supplies, plus imports of goods and services subject to reverse charge. Zero-rated supplies count toward the threshold even though the VAT charged on them is 0% — a common and costly assumption is that they do not.
Exempt supplies do not count. Neither does the sale of capital assets. If your business mixes exempt and taxable activity, the calculation needs care rather than a glance at total revenue.
You can work through your own position with the VAT Registration Checker, and once registered, the VAT Calculator handles the add-and-extract arithmetic that trips up manual invoicing.
Should you register voluntarily?
Above AED 187,500 it is a genuine choice, and it turns on who your customers are.
Registering usually helps if you sell mainly to VAT-registered businesses, who reclaim the VAT you charge and are indifferent to it, while you recover input VAT on your own costs. For a B2B services firm with meaningful supplier costs, this is often money left on the table.
Registering usually hurts if you sell mainly to consumers. You either raise prices by 5% and become less competitive, or absorb it and lose 5% of margin. Add quarterly filing obligations and record-keeping requirements, and the compliance cost is real for a small operation.
The registration deadline and what late costs
Once you cross the mandatory threshold, you have 30 days to apply. The application goes through EmaraTax, and late registration carries an administrative penalty — plus, more painfully, liability for the VAT you should have been charging during the unregistered period. You cannot go back and invoice clients for it after the fact in most cases, so it comes out of your margin.
This is why the rolling test matters so much. A business that discovers in December that it crossed the threshold in June is not facing a paperwork problem. It is facing six months of VAT it never collected.
A practical monitoring habit
Set a monthly check: total taxable supplies for the trailing 12 months, compared against AED 375,000. It takes two minutes in any accounting system and it converts an invisible deadline into a visible one.
Businesses near the threshold should also watch pipeline, not just history. If a signed contract will push you over within 30 days, the obligation starts then — the forward test does not wait for the revenue to land.
General information only. VAT treatment varies by activity and supply type; confirm your position with the Federal Tax Authority or a qualified adviser.