Most financial services in the UAE are exempt from VAT rather than zero-rated: interest and the margin on credit, dealing in shares and currencies, and life insurance sit outside VAT — but any service charged for an explicit fee or commission is standard-rated at 5% (Federal Decree-Law No. 8 of 2017, Articles 42 and 43, with the executive detail in Cabinet Decision No. 52 of 2017). Because exemption blocks input tax recovery, the classification of each revenue line decides how much of your cost base you can reclaim.
Exempt vs standard-rated: the line that decides your VAT bill
Exempt under Article 42 of the Executive Regulation (Cabinet Decision No. 52 of 2017):
- Granting, advance and transfer of loans and credit.
- Deposit accounts and current accounts.
- Dealing in currencies, notes and coins, and money broking.
- Issue, allotment, drawing, acceptance, buying or trading of securities — shares, bonds and sukuk.
Exempt under Article 43: life insurance and reinsurance.
Standard-rated at 5%: the same services when supplied for an explicit fee, discount, commission, rebate or similar consideration — custody fees, management fees, arrangement fees, brokerage commissions.
| Revenue line | VAT treatment | Input VAT recovery |
|---|---|---|
| Interest or margin on credit | Exempt | Not recoverable on related costs |
| Dealing in securities or currencies at margin | Exempt | Not recoverable |
| Custody and management fees | 5% | Recoverable |
| Life insurance premiums | Exempt | Not recoverable |
| Non-life insurance | 5% | Recoverable |
| Rent, IT and professional services | 5% | Recoverable only to the extent of taxable supplies |
Virtual assets: exempt since 2018
Cabinet Decision No. 100 of 2024 extended Article 42 to virtual assets: the transfer of ownership and the conversion of virtual assets are VAT-exempt, applying retroactively from 1 January 2018, and keeping, managing and enabling control of virtual assets became exempt from 15 November 2024 — while crypto services charged for an explicit fee remain standard-rated. Exemption here too means input VAT on platform, custody and compliance costs is not recoverable against those supplies.
Input tax recovery and partial exemption
Under Article 64, input tax is recoverable only to the extent it is attributable to taxable supplies. A firm whose revenue is 30% fee-based and 70% exempt recovers roughly 30% of general overhead input tax — the apportionment method must be documented, applied consistently and corrected against actual results. Restricted recovery on exempt lines is the single biggest VAT cost most financial services businesses underestimate.
Registration thresholds
Mandatory registration applies where taxable supplies exceed AED 375,000 in a 12-month period, with voluntary registration available above AED 187,500. Exempt supplies do not count toward the threshold — but fee-based income does, so a business with exempt margin plus growing fee revenue often crosses the threshold on the fee lines alone.
Deadlines and records
File the VAT return through EmaraTax within 28 days of the end of each tax period and keep VAT records for five years. Mixed exempt and taxable revenue lines make clean ledger coding the difference between a defensible return and an assessment.
FAQ
Is a brokerage commission exempt? No — an explicit commission is consideration for a service, so it is standard-rated at 5%.
Does exemption mean no VAT and full input tax recovery? No — exempt supplies carry no output VAT and block recovery of input tax on the related costs.
Are crypto conversions VAT-free in the UAE? The transfer of ownership and conversion of virtual assets are exempt, retroactive to 1 January 2018; crypto services charged for an explicit fee remain at 5%.
Finanshels provides bookkeeping services for financial services businesses — see also how to file VAT returns in the UAE, bookkeeping for crypto and blockchain companies and corporate tax for crypto and blockchain companies.
Reviewed by Gautam Sanoj, Senior Tax Advisor at Finanshels. Last reviewed 21 September 2026. Rules reflect Federal Decree-Law No. 8 of 2017, Cabinet Decision No. 100 of 2024 and FTA guidance as of that date; confirm your specific facts before acting.
