VAT for Restaurants in the UAE: Service Charges, Delivery Apps and Everyday Compliance (2026)

For a restaurant, VAT looks simple: everything is 5%. There's no zero rate for food in the UAE, no difference between eating in and taking away, and no special scheme for hospitality. Yet restaurants are among the businesses the FTA inspects most often, because the risks sit in day-to-day operations: menu prices, service charges, tips, free meals, delivery platform settlements and cash.

This guide is for restaurant owners, café operators, cloud kitchens, caterers and F&B groups. It covers how VAT applies to each part of a restaurant's income and costs, where the common errors are, what changed in October 2026, and how corporate tax applies to F&B businesses.

Quick answer: all food and drink sold by restaurants in the UAE carries 5% VAT, whether eaten in, taken away or delivered. Prices shown to customers must include VAT. A service charge added to the bill is taxable. A voluntary tip left by the customer isn't. When you sell through a delivery app, you normally account for VAT on the full menu price, and the app's commission to you is a separate 5% supply you can recover.

The rate: 5% on everything you sell

Unlike some countries, the UAE doesn't zero-rate basic food. Dine-in meals, takeaway, delivery, catering, beverages, bakery items and packaged food sold in a restaurant are all standard-rated. Outside catering for private events and corporate clients is also standard-rated.

That makes the rate easy. What matters is the amount VAT is charged on, and when.

Menu prices must include VAT

Any price shown to consumers, whether on a menu, a board, a website or a delivery app, must include VAT. If your menu says AED 50, the customer pays AED 50 and your VAT is AED 2.38 (50 × 5/105), not AED 2.50 on top. Adding VAT at the till to a price that was displayed without it is a breach of the price display rules.

Many restaurants list prices as "subject to 10% service charge and 5% VAT". The safer approach is to make the final price clear: show VAT-inclusive prices, and state clearly if a service charge will be added.

Service charges and tips

This is the area that causes the most confusion.

Example: A table orders food and drinks priced at AED 200 before VAT. The restaurant adds a 10% service charge of AED 20. VAT is 5% of AED 220, which is AED 11. The bill totals AED 231. If the customers then leave AED 25 in cash as a tip, that tip carries no VAT.

Distributing the service charge to staff doesn't change its VAT treatment. The restaurant collected it from the customer, so it is still the restaurant's taxable income.

Delivery apps and aggregators

When you sell through a delivery platform, two separate supplies happen:

1. You sell food to the customer. In the usual agency model, the platform collects payment on your behalf. You still account for 5% VAT on the full menu price the customer pays, not on the net amount the platform transfers to you.

2. The platform sells you a service. The commission and any marketing or listing fees are a separate supply to you, with 5% VAT. You can recover that VAT if you hold a valid tax invoice.

Example: A customer orders AED 105 of food (VAT-inclusive) through an app. The app's commission is 25% of the order, AED 26.25, plus AED 1.31 VAT, and it pays you AED 77.44. Your output VAT is AED 5 on the AED 105 sale. Your input VAT is AED 1.31 on the commission. A common mistake is to record only the AED 77.44 as revenue, which understates output VAT.

Reconcile platform settlement statements to your sales and VAT return every month. Discounts funded by the platform, discounts funded by you, refunds and delivery fees all need to be treated consistently. Some platforms operate as principal for certain orders, so read your agreement to confirm who is selling to the customer.

Free meals, staff food and promotions

Complimentary food for customers. Free items given as part of a paid meal, such as bread or a welcome drink, are part of that supply, so no extra VAT is due. Free meals given away on their own can be a deemed supply, on which you must account for VAT at cost, unless the gift is within the exception for business gifts of up to AED 500 per recipient per year.

Staff meals. If you provide meals to staff because the employment contract or the law requires it, the input VAT on those ingredients is recoverable and no deemed supply arises. If staff meals are a discretionary perk, the input VAT on them is blocked. Track staff meals separately in your POS rather than recording them as voids.

Discounts and vouchers. VAT is due on the price actually paid after a discount. Gift vouchers sold for use in your restaurant are generally taxed when redeemed, so track the liability in your accounts.

Tax invoices and your POS

For most diners, a simplified tax invoice (the till receipt) is enough. It must show your name, address and TRN, the date, a sequential number, a description of what was sold, the total including VAT and the VAT amount, or a statement that the price includes VAT. Corporate customers and anyone else who asks may need a full tax invoice. Read our tax invoice requirements guide for the details.

Since 14 April 2026, under Cabinet Decision No. 129 of 2025, failing to issue a tax invoice or credit note costs AED 2,500 for each case detected. Voided bills without an audit trail, manual receipts and refunds without credit notes are what inspectors look for. Your POS should:

• lock price changes and voids behind manager approval

• produce a daily Z-report that reconciles to cash, card and app takings

• keep records for at least five years, as the FTA's record-keeping rules require

Business-to-consumer sales are currently outside the UAE's e-invoicing mandate. Catering invoices to corporate clients are in scope, though, from 1 July 2027 for businesses with revenue below AED 50 million. See our e-invoicing guide.

Input VAT: costs restaurants can recover

Restaurants can recover VAT on most operating costs: food and beverage purchases from VAT-registered suppliers, rent on commercial premises, kitchen equipment, fit-out, utilities, packaging, marketing and the delivery platform's commission. Royalties paid to a foreign franchisor are imported services, and you account for them under the reverse charge in your return.

Two new rules from 1 October 2026 hit restaurants directly:

• Cash purchases. Buying fish, produce or supplies in cash from market traders can now block input VAT on supplies above the threshold to be set by Ministerial Decision. Move regular suppliers to bank transfer or card. See our guide to the new cash payment rules.

• Supplier checks. Your main food distributor is likely to be above AED 100,000 a year, which means full supplier verification applies before you claim input VAT. Read the supplier verification guide.

Corporate tax for restaurants

Restaurant companies pay corporate tax at 9% on taxable profit above AED 375,000. Many independent cafés and small restaurants can use Small Business Relief, extended to 2029, if revenue is no more than AED 3,000,000 in the tax period. Once revenue crosses that line, even for one year, the company files on the full regime.

Points that come up often for F&B businesses:

• Free zone outlets. Selling meals to the public is a transaction with natural persons, an excluded activity for the 0% free zone rate under Ministerial Decision No. 229 of 2025. A café in a free zone business park normally pays 9%.

• Groups with several outlets. Management fees, central kitchen charges and brand royalties between related companies must be priced at arm's length.

• Owner-run restaurants. An individual running a restaurant on their own licence must register for corporate tax once business turnover exceeds AED 1,000,000 in a calendar year.

• Cash controls. Unrecorded cash sales are an obvious corporate tax risk, as well as a VAT one. Clean daily reconciliations protect you in both.

Restaurant VAT checklist

• Show VAT-inclusive prices on menus, boards, websites and apps

• Apply 5% to service charges and automatic gratuities; keep voluntary tips separate

• Record delivery app sales at the gross menu price, and reconcile settlements monthly

• Track staff meals, comps and promotions separately in the POS

• Lock voids and refunds behind approval, and issue credit notes for refunds

• Stop paying suppliers in cash

• Build a verification file for suppliers paid over AED 100,000 a year

• Account for reverse charge VAT on foreign franchise royalties

Frequently asked questions

Is VAT charged on food in UAE restaurants?

Yes. All food and drink sold by restaurants carries 5% VAT, whether eaten in, taken away or delivered.

Is service charge subject to VAT in the UAE?

Yes. A service charge added to the bill is part of the price, so VAT applies to it.

Are tips subject to VAT?

A genuinely voluntary tip is outside the scope of VAT. A gratuity added automatically to the bill is taxable.

Who pays VAT on food delivery app orders?

Usually the restaurant, on the full menu price. The app charges the restaurant 5% VAT on its commission, which the restaurant can recover.

Must menu prices include VAT?

Yes. Prices displayed to consumers must include VAT.

Do free zone restaurants pay corporate tax?

Usually yes, at 9%, because meals sold to the public don't qualify for the 0% free zone rate.

Keeping your restaurant compliant

Restaurant VAT is mostly about discipline: correct prices, clean POS data and monthly reconciliations. When those slip, small errors add up quickly across thousands of bills. Our accounting team sets up F&B bookkeeping and POS reconciliations, and our VAT and corporate tax team handles VAT returns and corporate tax filing. Book a free consultation to review your set-up.

More sector guides: VAT for hotels and tourism, VAT for e-commerce, VAT for trading companies.

This article is general information based on UAE VAT and corporate tax legislation as of October 2026, including Federal Decree-Law No. 8 of 2017 as amended, Cabinet Decision No. 129 of 2025, Cabinet Decision No. 149 of 2026 and Ministerial Decision No. 229 of 2025. It is not tax advice. Check your specific position with the Federal Tax Authority or a qualified adviser.