In Abu Dhabi, the capital of the United Arab Emirates, restaurant taxation is governed by both federal-level and local emirate-level regulations. The main types of taxes and fees that apply to restaurants in Abu Dhabi include:
✅ 1. Value Added Tax (VAT) – 5% (Federal Tax)
Applicable to:
All food and beverage sales in Abu Dhabi (and UAE) restaurants, including dine-in, takeaway, and delivery.
Key Points:
- Introduced on 1 January 2018 under the UAE Federal Tax Authority (FTA).
- VAT is charged at 5% on the total bill, including service charges (if applicable).
- Restaurants must register for VAT if their annual taxable turnover exceeds AED 375,000.
- A Tax Registration Number (TRN) is mandatory for issuing VAT-compliant invoices.
Example Calculation: If a customer’s bill before VAT is AED 100, the VAT amount would be:
AED 100 × 5% = AED 5 VAT
So, the total customer bill becomes:
AED 100 + AED 5 = AED 105
Filing Obligations:
- VAT returns are usually filed quarterly or monthly, depending on turnover.
- VAT must be reported and paid through the FTA Portal.
✅ 2. Municipality Fee on Restaurants – 5% (Local Fee)
Applicable in: Abu Dhabi Emirate (regulated by Abu Dhabi Municipality)
What It Is:
A 5% municipality fee on the total restaurant bill, often inclusive of VAT and any service charges.
Practical Application:
- The fee is commonly included in the restaurant bill at the point of sale.
- This is a local levy, collected by the restaurant and paid to the Abu Dhabi Department of Economic Development (ADDED) or the Department of Municipalities and Transport (DMT).
Example:
If the post-VAT bill is AED 105, the municipality fee would be:
AED 105 × 5% = AED 5.25
So the final customer bill becomes:
AED 105 + AED 5.25 = AED 110.25
Notes:
- This municipality fee must be shown on customer invoices as a separate line item.
- Restaurants must remit collected fees monthly or quarterly to the local authorities.
✅ 3. Service Charges (Optional but Regulated)
Typical Rate: 5% to 10%, optional and not government-mandated.
Clarification:
- Restaurants in Abu Dhabi can legally add service charges to a customer’s bill, unlike Dubai which has more regulation around this.
- However, the UAE Consumer Protection Law requires that:
- If service charges are added, they must be clearly disclosed on the menu or invoice.
- The charges should not be misleading, and ideally benefit staff (like a tip pool).
✅ 4. Corporate Income Tax – Effective from June 2023
Applies only to: Net profits over AED 375,000 annually.
Tax Rate:
- 0% on taxable income up to AED 375,000
- 9% on taxable income above AED 375,000
Key Notes:
- Small restaurants or cafés making less than AED 375,000 in annual profit do not owe corporate tax.
- This tax is part of the UAE’s new Corporate Tax regime, under Federal Decree-Law No. 47 of 2022.
- Businesses can file for Small Business Relief if under the threshold.
Compliance:
- Restaurants must maintain audited financial records.
- Filing is annual through the EmaraTax system.
✅ 5. Tourism Fee (NOT Applicable in Abu Dhabi Restaurants)
While hotels and hotel-based restaurants in Abu Dhabi pay additional fees like:
- 6% tourism fee
- 4% municipality fee (for hotel stays)
- AED 15 per room per night
These do not apply to standalone restaurants or cafes not inside hotels.
✅ 6. Customs Duties (For Imported Ingredients)
If a restaurant imports its own ingredients or packaging, customs duties of 5% typically apply (managed at the federal level). Most items imported into the UAE attract this duty.
However, if ingredients are locally sourced, this does not apply.
✅ 7. Other License and Regulatory Fees (Annual)
To legally operate a restaurant in Abu Dhabi, you must account for business-related government fees including:
Licenses:
- Trade License (from ADDED): AED 3,000 – AED 15,000 per year (varies)
- Food Safety Permit (from Abu Dhabi Agriculture and Food Safety Authority – ADAFSA): AED 1,000–3,000 annually
- Civil Defense Safety Certificate: for fire and safety compliance
Additional Charges:
- Signage fees if using a shop board.
- Waste disposal fees from the municipality.
- POS system approval in certain cases (depending on software used, particularly if integrated with tax reporting).
These are operational and regulatory, not taxes per se, but crucial to compliance.
✅ Sample Tax Breakdown on a Restaurant Bill (Abu Dhabi)
Let’s say a customer dines at a café with a base bill of AED 100 and the restaurant adds a 5% service charge.
| Charge | Amount (AED) |
|---|---|
| Base food & beverage bill | 100.00 |
| Service charge (5%) | 5.00 |
| Subtotal | 105.00 |
| VAT (5% of AED 105) | 5.25 |
| Municipality fee (5% of AED 110.25) | 5.26 |
| Final bill total | 115.51 |
✅ Summary Table: Restaurant Taxes & Fees in Abu Dhabi
| Type of Tax / Fee | Rate | Applies to | Administered By |
|---|---|---|---|
| VAT | 5% | Sales (food, drinks, service charges) | UAE Federal Tax Authority |
| Municipality Fee | 5% | Total bill (inc. VAT and service charge) | Abu Dhabi Municipality |
| Service Charge | Optional | If declared clearly on menu/bill | Regulated by Consumer Law |
| Corporate Income Tax | 9% (above AED 375k) | Annual profits over AED 375,000 | UAE Ministry of Finance |
| Trade License | AED 3k–15k | Annual licensing cost | ADDED |
| Food Safety Certificate | AED 1k–3k | Annual food safety compliance | ADAFSA |
| Customs Duty (on imports) | 5% | On imported ingredients/equipment | UAE Customs Authority |
✅ Compliance Tips for Restaurant Owners in Abu Dhabi
- Register for VAT: If your revenue exceeds AED 375,000 per year.
- Display VAT and Municipality Fees Clearly: On every invoice.
- Service Charges: Clearly mention on your menus if you apply this.
- Corporate Tax Prep: If profits exceed AED 375,000, keep organized financials for tax filing.
- Use a POS System: That automatically applies VAT, municipality fee, and prints tax-compliant receipts.
- Stay Compliant with Renewals: Renew trade licenses and health permits annually.
✅ Frequently Asked Questions (FAQs)
❓ Is VAT included in the menu price at restaurants?
Not necessarily. Restaurants in Abu Dhabi may choose to:
- Include VAT in the menu price (and indicate “prices inclusive of VAT”)
- Or add it to the bill at checkout
Either way, it must be clearly disclosed.
❓ Do delivery and take-out orders include VAT and municipality fee?
Yes. Both dine-in and takeaway/delivery orders are subject to VAT and municipality fee.
❓ Are home-based food businesses taxed the same way?
If registered as a commercial food business and if exceeding the VAT threshold, yes. However, many small-scale or informal operations may not reach that threshold.
❓ Are tips taxed?
Voluntary cash tips given directly to staff are not taxed.
However, mandatory service charges are subject to VAT and municipality fees.
❓ What happens if a restaurant fails to pay VAT or fees?
Penalties from the UAE Federal Tax Authority (FTA) may include:
- Fines starting from AED 10,000
- Suspension of trade license
- Late payment interest
✅ Final Thoughts
Taxes in Abu Dhabi for restaurants are relatively straightforward but must be carefully managed for compliance. The major taxes are 5% VAT and 5% Municipality Fee, while corporate income tax applies only to businesses with higher profits. Service charges are optional but regulated, and all charges must be transparent to consumers.
If you’re operating or planning to open a restaurant in Abu Dhabi, it’s essential to:
- Set up a tax-compliant POS system
- Maintain clear financial records
- Work with a registered tax agent or accountant to stay compliant with UAE FTA laws and avoid fines
