The Restaurant With
The Cleanest Books Wins.
UAE tax has changed the rules for every restaurant. VAT, Corporate Tax, and Excise: what they are, what they require from you, and what the operators who get it right do differently.
restaurant sales
above AED 375K
select beverages
Relief deadline
Every meal you serve is taxable.
All food and beverages served in a restaurant, cafe, bar, or catering operation are subject to 5% VAT. No exceptions based on cuisine, price point, or payment method.
- Menu prices must be VAT-inclusive. You cannot display AED 60 and charge AED 63 at the till. The 5% must be built into every price the customer sees.
- Your TRN must appear on every receipt. Your Tax Registration Number issued by the FTA. No TRN on receipts means non-compliance regardless of whether you file returns.
- Records must be kept for a minimum of 5 years. The FTA can audit any period within that window. Your POS data, Z-reports, and invoices all count as records.
| Annual Revenue | Registration | What it means |
|---|---|---|
| Above AED 375,000 | Mandatory | Legally required to register, charge 5%, and file quarterly returns. |
| AED 187,500 to 375,000 | Optional | Voluntary registration lets you reclaim input VAT on supplier costs. |
| Below AED 187,500 | Not eligible | Cannot register. Should not be charging VAT. |
Any restaurant with a meaningful number of covers will almost certainly exceed AED 375,000 in annual revenue. Zero-rating on basic foodstuffs at supermarkets does not apply once food is prepared and served in a hospitality setting.
The hidden cost in your beverages.
Excise Tax is a federal tax introduced in 2017 on specific goods deemed harmful to health or the environment. Unlike VAT, it is not collected at the point of sale by you. It is paid upstream by the importer or producer and embedded invisibly into the price you pay your supplier. You never see a line item for it, but you feel it in your margins.
| Product | Excise Rate | Impact on your operation |
|---|---|---|
| Carbonated drinks | 50% | Soft drinks, sparkling water, flavoured fizzy drinks. Cost passed through supplier pricing. |
| Energy drinks | 100% | Red Bull, Monster, and all energy drink brands. Requires a high markup to maintain margin. |
| Tobacco products | 100% | Cigarettes and shisha products. Factor into pricing if you retail tobacco on-site. |
| Sweetened drinks | 50% | Added-sugar beverages including juices with added sugar. |
You do not file Excise Tax yourself unless you are an importer. But if your beverage margins are consistently tighter than expected, Excise Tax embedded in supplier costs is often the reason. Review your beverage cost cards line by line.
The game changed.
Most restaurants have not.
Federal Decree-Law No. 47 of 2022 is in effect. Every dirham of revenue, every expense, and every invoice is now a tax event. Here is what it requires from your operation.
-
1
Register for corporate tax
All UAE entities including mainland, free zone, sole proprietor, and LLC must register with the FTA. Non-registration carries an AED 10,000 penalty, regardless of whether you currently owe any tax.
-
2
Switch to accrual-basis accounting
Revenue is taxed when earned, not when cash is received. Your bank balance is no longer your P&L. A restaurant that invoices in December but collects in January must report December as taxable revenue.
-
3
Maintain IFRS-compliant records
All financial records must follow International Financial Reporting Standards. This means proper invoice management, correct COGS valuation with weighted average cost, and documented expense treatment. Receipts in a shoebox no longer qualify.
-
4
Keep a 7-year digital audit trail
Every invoice, bill, expense, and journal entry must be retained and retrievable for 7 years. The FTA can request any record at any time. Manual filing systems will not survive a formal audit.
Corporate Tax is not an accountant's problem. It is an operator's problem. The quality of your POS data, your invoice discipline, and your expense tracking determine how much you owe, and how defensible your position is if the FTA asks questions.
Two numbers that will define your tax year.
Most restaurant owners know neither. Both require action now, not at year-end.
The AED 3M cliff is the one most operators miss. Revenue does not have to stay above AED 3M for the relief to be gone: crossing it once is permanent. If you are anywhere near this threshold, you need real-time revenue visibility, not monthly reports.
- Mixing personal and business expenses. Personal expenses paid through the business create disallowable deductions. The FTA will add them back to taxable income. The 50% cap on client entertainment is also routinely over-claimed.
- Not knowing your real-time revenue position. A strong month can push you past AED 3M without warning. Once Small Business Relief is forfeited, it is gone permanently. Even if revenue drops back next year.
- No digital audit trail. The FTA can request any record from the past 7 years. If your invoices are in WhatsApp chats and expenses are paper receipts, you cannot defend a single line of your tax return.
You cannot manage
what you cannot see.
Most UAE restaurants have a visibility problem long before they have a tax problem. Without real-time numbers, compliance becomes guesswork and management becomes reactive.
Monitor the AED 3M cliff in real time
Monthly tracking is too slow. You need a live dashboard.
Separate channels for tax tagging
Dine-in, delivery, and catering can have different tax treatments.
Produce a compliant P&L on demand
Your accountant cannot protect you if your numbers are not ready.
Prove COGS valuation to an auditor
IFRS requires weighted average cost tracking. Guessing is not a defence.
Know your best and worst performers
Real-time data turns compliance infrastructure into a management tool.
Negotiate better terms with suppliers
You cannot negotiate from a position of data you do not have.
Open a second location with confidence
Expansion without financial visibility is how restaurants fail at scale.
Present clean books to investors or a buyer
The restaurant with verifiable financials commands a premium valuation.
A well-connected POS and accounting system does not just reduce your compliance workload. It changes what you can see and when you can see it. That is the difference between running a restaurant on intuition and running it on information.
Where do you stand right now?
Three inputs. Instant answer. Move the sliders to see your estimated corporate tax position.
Move the sliders to see your position
This calculator provides an estimate based on the inputs provided. It does not account for all allowable deductions, elections, or entity-specific factors. Consult a UAE-registered tax agent for an accurate assessment.
Do not wait for a
surprise tax bill.
The restaurants that act now will have clean books, real-time visibility, and zero audit anxiety. The ones that wait will be scrambling at year-end.
This guide is for general orientation only. It is not legal or tax advice. For your specific situation, consult a UAE-registered tax agent or accountant.
Sources: Federal Decree-Law No. 47 of 2022 (UAE Corporate Tax) · Ministerial Decision No. 139 of 2023 (Small Business Relief) · UAE FTA Official Guidance · IFRS Foundation Standards
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