How VAT applies to restaurants and food service in the UAE

What is VAT on restaurants in the UAE?

VAT on restaurants UAE refers to the 5% value added tax charged on prepared food and drinks sold by cafes, restaurants, hotels and similar venues. Restaurant sales are standard rated under Federal Decree-Law 8 of 2017. The tax applies to dine-in meals, takeaway, delivery, catering and most service charges added to the bill.

If you run a food service business in the UAE, VAT touches almost every line of your menu. The rate has been 5% since January 1, 2018, but the practical questions are harder: how do you treat the 10% service charge, who pays VAT on Talabat delivery fees, and what counts as a valid tax invoice for a AED 18 shawarma? This guide answers those questions using the Federal Tax Authority (FTA) rules and the wider UAE VAT framework.

The basic rule: restaurant sales are standard rated at 5%

Prepared food and beverages sold for immediate consumption are standard rated supplies in the UAE. That covers nearly every transaction in a restaurant, cafe, food truck, ghost kitchen or hotel outlet. There is no zero rating or exemption for restaurant meals, even healthy food, baby food or staples like rice and bread once they are prepared and served.

Mandatory VAT registration applies once taxable supplies cross AED 375,000 in the past 12 months or expected next 30 days. Voluntary registration is available from AED 187,500. Most established restaurants in Dubai, Abu Dhabi and Sharjah cross the mandatory threshold quickly, especially with delivery volumes.

Who must register

• Single-outlet restaurants once turnover passes AED 375,000.
• Cloud kitchens and delivery-only brands, on the same threshold.
• Hotel food and beverage operations, usually registered under the hotel entity.
• Catering companies, including corporate and event caterers.
• Food trucks and kiosks, including those in malls and food courts.

What about home bakers and small caterers

Home-based food businesses with a UAE trade licence follow the same VAT rules. Below AED 375,000 you do not have to register, but you cannot charge VAT or recover input tax. Once you cross the threshold, registration is mandatory within 30 days.

How VAT is calculated on a restaurant bill

VAT is calculated on the total consideration the customer pays, including service charge, cover charge and any compulsory tip. Optional tips left voluntarily are outside the scope of VAT. Most UAE restaurants quote menu prices inclusive of VAT, but the tax invoice must still show the VAT amount separately.

Worked example: dine-in bill

A guest orders food priced at AED 200 on the menu. The restaurant adds a 10% service charge and a 7% municipality fee on the food only.

VAT applies on top of the municipality fee and service charge, because both form part of the consideration for the supply. If your menu states prices are VAT inclusive, you back-calculate the VAT as total divided by 21.

Worked example: takeaway coffee

A coffee priced at AED 21 inclusive of VAT contains AED 1 of VAT and AED 20 of net revenue. The VAT calculation is 21 divided by 1.05.

Service charge, tips and other fees

Service charge is the most confusing line for restaurant finance teams. The FTA treats compulsory service charges as part of the taxable consideration. That means VAT is due on the service charge, even when it is paid out to staff.

Service charge

A 10% or 12% service charge automatically added to the bill is subject to 5% VAT. The restaurant collects the VAT and reports it on the return, regardless of how the charge is distributed internally.

Tips

Voluntary tips left by the customer, in cash or added to a card payment at the customer's choice, are outside the scope of VAT. To stay outside scope, the tip must be genuinely optional and paid to staff, not retained by the business.

Municipality and tourism fees

In Dubai, the 7% municipality fee and 10% service charge are common at hotel outlets. The Tourism Dirham fee per room night is separate from food and beverage. For restaurants, municipality fees are part of the taxable base for VAT.

Corkage, cover and minimum spend

All compulsory charges added to a bill are part of the consideration and subject to 5% VAT.

Delivery, aggregators and cloud kitchens

Delivery has changed how UAE restaurants think about VAT. The treatment depends on who is the principal seller in the transaction.

Restaurant-owned delivery

When the restaurant delivers using its own drivers and charges the customer directly, the full amount including delivery fee is one supply at 5%. The restaurant issues the tax invoice.

Aggregator platforms

When an order comes through a delivery aggregator, the restaurant usually remains the principal supplier of the food. The platform charges a commission for its services, which is itself subject to 5% VAT. The restaurant accounts for VAT on the gross order value and recovers input VAT on the commission invoice, subject to normal rules.

Cloud kitchens

Cloud kitchens that operate purely through aggregators follow the same logic. Each brand operating from the kitchen must consider its own turnover for registration. Rent paid to the cloud kitchen operator carries 5% VAT, which is recoverable as input tax.

Input VAT: what restaurants can recover

Restaurants registered for VAT can recover input tax on costs used to make taxable supplies. The trick is documentation: every supplier invoice must be a valid tax invoice showing the supplier's TRN (Tax Registration Number).

Imported ingredients and equipment trigger import VAT under the reverse charge. For more on this, see our guide to VAT on Imports UAE.

Tax invoices and receipts

The FTA requires a tax invoice for taxable supplies. For restaurant sales, the rules differ between full and simplified invoices.

Simplified tax invoice

For supplies under AED 10,000, a simplified tax invoice is allowed. It must show:

• The word "Tax Invoice".
• Name, address and TRN of the supplier.
• Date of issue.
• Description of goods or services.
• Total amount payable and total VAT charged.

This covers almost every dine-in or takeaway receipt. A point-of-sale receipt that contains these fields is a valid simplified tax invoice.

Full tax invoice

For B2B (business-to-business) sales over AED 10,000, such as event catering or corporate bookings, a full tax invoice is required. It must include the customer's name, address and TRN, sequential invoice number, and VAT shown per line item.

Filing, returns and e-invoicing

VAT returns are filed within 28 days of the end of each tax period, usually quarterly. Late filing or payment triggers penalties under Cabinet Decision 49 of 2021 and related law.

UAE e-invoicing is coming under the Peppol 5-corner DCTCE (Decentralized Continuous Transaction Control and Exchange) model in the PINT AE format. Phase 1 go-live is January 1, 2027 for businesses with revenue above AED 50 million, with appointment of an accredited ASP (Accredited Service Provider) required by October 30, 2026. Smaller restaurants follow from July 1, 2027. Penalties for non-compliance under Cabinet Decision 106 of 2025 range from AED 2,500 to AED 50,000 per violation.

Restaurants should map their POS, delivery integration and accounting systems now so B2B invoices, catering contracts and aggregator commissions all flow into a compliant format.

Tourist VAT refunds and restaurants

The UAE tourist refund scheme run by Planet covers retail goods exported by tourists. It does not apply to restaurant meals, hotel stays or any service consumed inside the UAE. Tourists pay 5% VAT on their meals like residents, with no refund mechanism for food and beverage.

Free zone restaurants

Free zone restaurants are treated like mainland restaurants for VAT. Designated Zones under the VAT law are usually logistics and industrial areas. A restaurant inside a Designated Zone still charges 5% VAT on prepared food and drinks consumed there, because the supply is for consumption inside the zone.

Common compliance mistakes

• Treating compulsory service charge as outside the scope of VAT.
• Forgetting to account for VAT on aggregator gross sales when only the net is received.
• Recovering input VAT on entertainment or staff personal expenses.
• Issuing receipts without the TRN, making them invalid as tax invoices.
• Missing the 28-day VAT return deadline during peak season.
• Not separating zero-rated catering exports (rare) from standard rated sales.

If your business also handles other transaction types, see our explainers on VAT on Real Estate UAE for premises owned by the group, VAT on Export Services UAE for cross-border catering, and the broader UAE VAT hub for rules across sectors.

Sample VAT workflow for a restaurant

1. Configure POS to charge 5% VAT on every taxable item, including delivery fees and service charges.
2. Print receipts that meet simplified tax invoice rules with the restaurant TRN.
3. Reconcile aggregator statements monthly: gross sales, commission, VAT on commission, net payout.
4. Track input VAT on rent, utilities, ingredients, packaging and capital goods.
5. Exclude blocked items: customer entertainment, gifts above AED 500 per person per year, private use.
6. Issue full tax invoices to corporate clients for catering and events.
7. File the VAT return within 28 days of period end and pay any net VAT due.

For background on adjacent sectors, you can also read VAT on Financial Services UAE, VAT on Healthcare UAE and VAT on Education UAE to see how exempt and zero-rated treatments differ from restaurants.

Official sources

Restaurant VAT rules sit inside the wider VAT framework administered by the FTA. For primary references, consult the UAE Federal Tax Authority and the UAE Ministry of Finance. E-invoicing guidance is published on the UAE MoF e-invoicing portal.

If you run a restaurant group, cloud kitchen or catering company in the UAE and want POS, accounting and e-invoicing data flowing cleanly into Phase 1 compliance, get UAE e-invoicing pricing from EInvoice Direct. An accredited ASP is included with the software at no extra charge, so you can finish the project in one step.