Since the introduction of value added tax (VAT) in the United Arab Emirates (UAE) on 1 January 2018 under Federal Decree-Law No. 8/2017 On Value Added Tax (as amended by Federal Decree-Law No. 18/2022 Amending some provisions of Federal Decree-Law No. 8/2017 on VAT and Federal Decree-Law No. 16/2024 Amending some provisions of Federal Decree-Law No. 8/2017 on the Value-Added Tax), the indirect tax landscape has become an integral part of commercial practice. While VAT is designed as a broad-based consumption tax, its contractual implications are often underestimated. Poorly drafted VAT clauses can lead to payment disputes or unrecoverable input VAT, particularly in cross-border or intra-group transactions.

When reviewing or drafting commercial contracts, practitioners must ensure that VAT treatment, pricing, invoicing, and compliance responsibilities are clearly defined and consistent with Federal Decree-Law No. 8/2017 and Cabinet Decision No. 52/2017 On the Implementing Regulation of Federal Decree-Law No. 8/2017 on the Value Added Tax.