Business Central in the UAE: 5% VAT

VAT in the UAE is 5%, and that sounds simple. But you still have to set up the VAT configuration correctly in Business Central, and you need to know where the registration thresholds lie. Microsoft has no ready-made localization for the UAE that we have been able to find, so a lot you must set up yourself. The article shows what the setup consists of and where you must check the rules.

What we know about the VAT

The standard VAT rate in the UAE is 5%. Registration is mandatory when taxable supplies and imports exceed AED 375,000 within 12 months. Voluntary registration is possible from AED 187,500. This information comes from the Federal Tax Authority (FTA), and you should check the current wording on the FTA's page yourself before acting on it. That also applies to which supplies are exempt or zero-rated.

The article does not go into corporate tax or other duties.

The thresholds apply to taxable supplies and imports, not simply to the company's total turnover. So check the definition with the FTA if you are close to one of the thresholds.

No ready-made UAE localization

Microsoft's overview of E-Documents localizations on Microsoft Learn mentions Australia, Denmark, Germany, Norway, Spain and several others. The UAE is not on the list as it stood in October 2026. We therefore do not claim that Business Central has a UAE localization from Microsoft.

That does not mean the system cannot be used in the UAE. Companies use the standard version, often together with extensions from partners. Always ask your partner what is covered and what has been custom-built. Also check Microsoft AppSource.

VAT setup in standard

The VAT setup in Business Central is based on posting groups. You create VAT Business Posting Groups for customer types and VAT Product Posting Groups for items and services. The combination is on the VAT Posting Setup page, where you specify the VAT rate and the general ledger accounts the VAT is posted to.

With the same tools you can create a group for items at 5%, one for zero rate and one for exempt supplies. Which group an item belongs to is decided by the FTA's rules, not by Business Central.

Create a VAT Product Posting Group for each VAT treatment.
Create business groups for local customers, exports and customers in other countries.
Set the rate and the accounts on VAT Posting Setup.
Assign the groups to customers, vendors and items.
Test by posting a sales invoice and a purchase invoice and check the general ledger entries.

What you must clarify with an auditor

Which supplies are exempt, and which are zero-rated. What invoices must look like to be valid. And how the VAT return must be filed. These are the FTA's rules, and a local auditor or tax adviser must confirm what applies to you. We do not give tax advice.

Remember e-invoicing too. The obligation to issue electronic invoices is coming in the UAE, and the VAT setup must be right before invoices can be sent through the system. See our article on the timeline.

Get the answers in writing, and put them into your setup note in the Business Central project. Then the next person who has to change a VAT group can see why it is set up the way it is, and who confirmed it. It also makes a later review quicker.

Check invoices and documents

VAT setup is only one part. The invoice must also contain the information the FTA requires, and it is the FTA's rules that decide which. Make a sample invoice, and have it reviewed by a local auditor before you send the first real one.

Language and layout of the invoice you should clarify with the FTA or your adviser rather than assume. If the layout must be changed in Business Central, it can be done by adjusting the document report.

Where Addverk comes in

We work in Denmark and the UAE and can help with setting up Business Central. Write to us if you want to hear how we would approach it.