VAT for Online Stores in the UAE: When to Register and How to Set It Up on Shopify
A plain-English guide to 5% VAT for online stores in the UAE, covering the AED 375,000 threshold, tax invoices, selling to the GCC, and configuring VAT in Shopify.
Short answer: UAE VAT is 5%. Registration is mandatory once your taxable sales exceed AED 375,000 over the last 12 months (or are expected to within the next 30 days), and optional from AED 187,500. Once registered, you charge VAT on your prices, issue tax invoices and file periodic returns with the Federal Tax Authority. Shopify can calculate VAT automatically once it's set up correctly.
This article is general information, not tax advice. Rules and penalties change, so confirm with the Federal Tax Authority or a certified accountant.
Is my online store subject to VAT?
Yes. Selling online follows the same rules as selling in a shop. The only question is when registration becomes mandatory for you:
| Taxable sales over 12 months | Your position |
|---|---|
| Under AED 187,500 | Not eligible to register (with some exceptions) |
| AED 187,500 – 375,000 | Voluntary registration |
| Over AED 375,000 | Mandatory registration within 30 days |
Example: an abaya store selling about AED 35,000 a month passes AED 385,000 after roughly 11 months, so registration becomes mandatory.
What changes after you register?
- You add 5% to sale prices (or make your prices VAT-inclusive).
- You issue tax invoices showing your Tax Registration Number (TRN).
- You file VAT returns periodically (usually quarterly).
- You reclaim input VAT: the VAT you paid on business purchases such as design, ads and shipping, provided you hold valid tax invoices.
Is voluntary registration worth it?
It can be, if your business costs (stock, ads, design) are high and you want to reclaim input VAT from the start. But it comes with returns and obligations. Discuss it with your accountant.
Prices: VAT-inclusive or added at checkout?
UAE shoppers expect to see the final price. The best option is usually VAT-inclusive prices on the product page, with a note such as "Price includes VAT". That avoids a price surprise at checkout, one of the biggest causes of abandoned carts.
How to set up VAT in Shopify
In your Shopify admin:
- Go to Settings → Taxes and duties.
- Choose the United Arab Emirates and add your TRN.
- Turn on "Include tax in prices" if you want VAT-inclusive pricing.
- Check your invoice template shows your TRN and the VAT clearly. Many stores use an invoicing app that supports bilingual Arabic and English tax invoices.
- Place a test order and check VAT at checkout and on the invoice.
Selling to other GCC countries
When you ship from the UAE to a customer in Saudi Arabia, Kuwait or elsewhere, the VAT treatment depends on the type and destination of the sale, and the customer may pay taxes or customs duties on delivery in their country. Explain this on your shipping page, and ask your accountant how your exports should be treated.
Shipping details are in Shopify shipping in the UAE.
Common mistakes
- Registering late after crossing the threshold. Late-registration penalties are significant.
- Mixing personal and business accounts.
- Invoices without a TRN or a VAT breakdown.
- Not keeping expense invoices needed to reclaim input VAT.
FAQ
What is the VAT rate in the UAE?
5% on most goods and services.
When do I have to register for VAT?
When taxable sales exceed AED 375,000 over 12 months, or are expected to within the next 30 days.
Is VAT charged on my Shopify subscription?
Shopify's digital services may be subject to VAT depending on your country. If you're VAT-registered, add your TRN to your Shopify billing account.
Does an e-Trader licence require VAT registration?
The licence and VAT registration are separate. Registration depends on sales volume, not licence type. See ecommerce licence in the UAE.