VAT for restaurants in the UAE: a practical guide

This guide explains the general rules as they apply to restaurants. It is not tax advice; check your own position with a registered tax agent or the Federal Tax Authority (FTA) at tax.gov.ae.

The rate, and who must register

VAT in the UAE has been charged at a standard rate of 5% since January 2018. Restaurant meals, drinks, takeaway and delivered food are standard-rated.

• Mandatory registration applies once taxable supplies exceed AED 375,000 in the previous 12 months, or are expected to within the next 30 days.
• Voluntary registration is available above AED 187,500.

Once registered, you receive a Tax Registration Number (TRN), which must appear on your tax invoices.

Inclusive or exclusive menu prices

Prices shown to consumers are generally expected to include VAT, so most restaurants set VAT-inclusive menu prices. What matters operationally is consistency: the menu, the till, the online storefront and the invoice must all treat the price the same way. A AED 52 burger priced inclusive contains AED 2.48 of VAT; priced exclusive, the guest pays AED 54.60.

In Dinivoo you choose inclusive or exclusive pricing once, preview the effect, and the POS, storefront and invoices follow it.

Tax invoices and credit notes

A registered restaurant issues a tax invoice for its supplies. Two forms are common in hospitality:

• Simplified tax invoice — used where the customer is not VAT-registered, or where the customer is registered and the supply does not exceed AED 10,000. This covers most restaurant bills.
• Full tax invoice — needed for VAT-registered business customers above that amount, for example a corporate catering order. It includes the customer’s name, address and TRN.

Key details include the words “Tax Invoice”, your name, address and TRN, a sequential invoice number, the date, a description of what was supplied, the VAT rate and the VAT amount in AED. Mistakes are corrected with a tax credit note, not by editing an invoice that has already been issued.

Discounts, service charges and tips

• Discounts: VAT is due on what the guest actually pays. A 20% promotion on a AED 100 bill means VAT on AED 80.
• Service charges added to the bill are part of the price of the meal and are subject to VAT.
• Tips that are genuinely voluntary and passed to staff are generally treated differently from a compulsory service charge. Confirm the treatment of your own tipping arrangement with your tax agent.

Recovering input VAT

VAT paid on business purchases — ingredients, packaging, equipment, rent where VAT is charged — can usually be recovered against the VAT you collect, provided you hold valid tax invoices from VAT-registered suppliers. Some costs are blocked from recovery, such as entertainment provided to people who are not employees and motor vehicles available for personal use.

This is where many restaurants leave money behind: supplier invoices sit in a drawer and never reach the return. Recording purchases when stock is received — as Dinivoo’s purchase orders and receiving do — means the input VAT register builds as you go.

The quarterly VAT return

The VAT return (form VAT201) reports the VAT on your sales (output VAT) and on your purchases (input VAT) for the tax period. If output exceeds input you pay the difference; if not, you have a refundable position. Most businesses have quarterly tax periods, and the return and payment are due by the 28th day after the period ends. Returns are filed on the FTA’s EmaraTax portal.

Records to keep

Keep your tax invoices, credit notes, purchase invoices and the workings behind each return. VAT records are generally required to be kept for at least five years.

How Dinivoo helps

Dinivoo issues structured simplified and full tax invoices and credit notes as you trade, keeps an input VAT register from your purchases and assembles VAT201 working papers you can review and export. It does not file the return or give tax advice — you or your agent file on EmaraTax. See Dinivoo’s VAT and Corporate Tax tools for restaurants.