UAE VAT for Service Businesses: What Salons, Restaurants, and Clinics Must Charge (2026)
Plain-English guide to UAE VAT (5%) for Dubai service business owners — what is taxable, how to register, how to charge clients, VAT on tips and service charges, invoicing requirements, and how to file returns with the FTA.
UAE VAT at 5% has been in effect since 1 January 2018. Despite nearly a decade of operation, it remains a source of confusion for Dubai salon, restaurant, and clinic owners — particularly around what to charge, how to invoice, and what the service charge treatment is.
This is the practical guide, specific to service businesses.
Note: This is educational content based on published FTA guidance. Engage a UAE-registered tax agent for advice specific to your business.
Source: UAE Federal Tax Authority — tax.gov.ae | Federal Decree-Law No. 8 of 2017 on Value Added Tax.
VAT Rates: What Applies to Service Businesses
| Supply Type | VAT Rate | Examples |
|---|---|---|
| Standard-rated | 5% | Salon services, restaurant meals, clinic consultations, gym memberships, spa treatments |
| Zero-rated | 0% | Certain exports, some international services |
| Exempt | 0% (no recovery of input VAT) | Bare land, residential property, local passenger transport, financial services |
Service businesses are almost entirely standard-rated. Every haircut, meal, treatment, or fitness class you charge for attracts 5% VAT if you are registered.
Products sold in salons: Retail haircare, skincare, and cosmetic products are also standard-rated at 5%.
Exceptions to check:
- Educational services: some exempt (verify with FTA if you offer courses)
- Medical services: healthcare provided by licensed healthcare professionals may be zero-rated — check if your clinic qualifies
Registration: When You Must Register
The numbers:
| Annual Taxable Revenue | Registration |
|---|---|
| Above AED 375,000 | Mandatory — must register |
| AED 187,500 – AED 375,000 | Voluntary — can register |
| Below AED 187,500 | Cannot register |
Monthly equivalent: AED 375,000 ÷ 12 = AED 31,250/month. A salon consistently generating above AED 31,250/month in service revenue must register for VAT.
How to register: Via the FTA's EmaraTax portal at tax.gov.ae. You'll need: trade licence, Emirates ID, bank account details, and estimated turnover. Registration is free. Timeline: 5–20 business days.
Once registered: You receive a Tax Registration Number (TRN). Display it on all tax invoices.
Penalty for late registration: AED 20,000 fixed penalty. If you have been operating above the threshold without registering, you owe VAT on all past supplies during that period — backdated from when you should have registered.
How to Charge VAT to Clients
You have two options for displaying prices:
Option 1: VAT-exclusive pricing (most common in salons) Display the service price, then add VAT at checkout.
- Haircut: AED 120
- VAT (5%): AED 6
- Total: AED 126
Option 2: VAT-inclusive pricing (common in restaurants) Display the total price including VAT.
- Burger meal: AED 63 (includes 5% VAT)
- The underlying VAT portion: AED 63 ÷ 1.05 × 0.05 = AED 3
Either is legally permitted, but you must be clear which applies. Restaurants that display VAT-inclusive prices on menus must not then add VAT again at the till.
Tax Invoices: What Must Be on Your Receipt
A valid tax invoice (required for all supplies above AED 250 to VAT-registered clients) must include:
- The words "Tax Invoice"
- Your business name and address
- Your Tax Registration Number (TRN)
- Date of supply
- Description of goods/services
- Quantity and unit price
- Taxable amount (before VAT)
- VAT rate applied (5%)
- VAT amount charged
- Total amount payable
For retail supplies under AED 250 to non-registered clients (typical in salons): a simplified tax invoice is acceptable — the full list is not required, but your TRN must still appear.
Practical implementation: Fresha, Booksy, and most UAE POS systems (including Foodics) generate compliant tax invoices automatically once your TRN is entered in the settings. Verify this is set up correctly.
The Service Charge: VAT Treatment
The 10% service charge added by most Dubai restaurants is subject to VAT.
Correct calculation on a AED 200 meal:
- Food: AED 200.00
- Service charge (10%): AED 20.00
- Sub-total: AED 220.00
- VAT (5% on AED 220): AED 11.00
- Total: AED 231.00
Some restaurants display their menu prices as "all-inclusive" (service + VAT already in the shown price). This is permitted if clearly communicated — but the menu price must then be the final price paid.
Tips: Voluntary tips left by customers are not subject to VAT — they are not consideration for a supply. Mandatory service charges are subject to VAT.
Input VAT: What You Can Recover
As a VAT-registered business, you can reclaim VAT you pay on business purchases — this is called input VAT recovery.
Recoverable for service businesses:
- VAT on salon products and supplies purchased for use in treatments
- VAT on restaurant ingredients and packaging
- VAT on equipment, furniture, and fit-out costs
- VAT on professional services (accountant, lawyer fees)
- VAT on marketing and advertising services
- VAT on utilities (commercial premises)
- VAT on commercial rent (if the landlord is VAT-registered and charges VAT)
Not recoverable:
- VAT on entertainment expenses (client meals, staff entertainment) — 50% limit applies
- VAT on personal expenses
How recovery works: In your quarterly VAT return, you declare output VAT (collected from clients) and input VAT (paid on purchases). If output VAT exceeds input VAT, you pay the difference to the FTA. If input VAT exceeds output (rare for service businesses), you can claim a refund or carry the credit forward.
Filing VAT Returns
Frequency: Quarterly for most businesses (every 3 months). Tax periods are typically January–March, April–June, July–September, October–December.
Where: EmaraTax portal at tax.gov.ae.
Deadline: 28 days after the end of the tax period.
- Q1 (Jan–Mar) → due 28 April
- Q2 (Apr–Jun) → due 28 July
- Q3 (Jul–Sep) → due 28 October
- Q4 (Oct–Dec) → due 28 January
What you report:
- Box 1: Standard-rated supplies (your total revenue subject to 5% VAT)
- Box 9: Total output VAT (Box 1 × 5%)
- Boxes for input VAT on expenses
- Net VAT payable or refundable
Record keeping: The FTA requires you to keep VAT records for 5 years. This means: all tax invoices issued, all purchase invoices received, VAT return submissions, payment records.
Common Mistakes Dubai Service Businesses Make
1. Charging VAT without being registered. Collecting 5% from clients without a TRN is illegal. You cannot charge VAT unless registered.
2. Not registering when revenue crosses the threshold. Monitor your rolling 12-month turnover. The moment you exceed AED 375,000, the 30-day registration clock starts.
3. Applying the wrong rate. All standard service business supplies are 5%. If you're applying a different rate to any service, verify with FTA guidance.
4. Forgetting to update Talabat/Deliveroo with your TRN. Delivery platforms need your TRN to handle VAT correctly on delivery orders. Check this in your Partner Portal settings.
5. Missing the quarterly filing deadline. Even if you owe zero VAT (input exceeds output), you must file the return. Late filing is penalised regardless of whether tax is owed.
6. Failing to issue tax invoices to VAT-registered clients. B2B clients (salons buying from product suppliers, restaurants buying from food companies) need proper tax invoices to recover their input VAT. Simplified receipts are not sufficient for B2B transactions above AED 250.
The Practical Setup Checklist
- Calculate your last 12 months' total service revenue
- If above AED 375,000 and not registered: register immediately at tax.gov.ae
- Enter your TRN in your POS/booking system (Fresha, Foodics, etc.)
- Verify your receipts display: TRN, VAT amount, total
- Set up quarterly calendar reminders for filing deadlines
- Maintain a folder (digital or physical) for all purchase invoices with VAT
- Confirm Talabat/Deliveroo TRN is registered if applicable
The administrative burden of UAE VAT is manageable once the initial setup is done. At 5% on a modest service business, the VAT cost to clients is minimal — and the input VAT you recover on your own purchases partially offsets the compliance cost.