The Challenge
"We operate across three states and our finance team spends more time reconciling sales tax exemptions than closing the books — groceries are exempt in one state, taxed near 7.5% in another, and our restaurant unit gets hit for close to 10% at the till, yet half our services aren't taxed at all. There's no single number we can plan around."
This is the everyday reality of US sales tax: no federal VAT, but a patchwork of state and local rates that can run close to 7.5% on general goods and up to 10% on restaurant sales, with wildly inconsistent treatment of groceries, services and real estate depending on the state. For an owner weighing a UAE base — whether relocating personally or setting up a second entity — the first question is always how VAT actually compares once you strip away the state-by-state noise.
Our Approach
- Restaurants and F&B — US dine-in and takeaway sales tax runs roughly 7.5–10% depending on the state; UAE VAT is a flat 5% nationwide, no local top-ups.
- Domestic services — many US states leave services untaxed (0%) while goods are taxed, creating classification disputes; the UAE applies one flat 5% standard rate to services consumed locally, no ambiguity.
- Real estate — the US charges no VAT/sales tax on property (0%); the UAE mirrors this in substance — residential first-supply is 0%, resale and lease are VAT-exempt, and bare land is exempt, with only commercial property standard-rated at 5%.
When we assess a move like this, we go line by line: which of your revenue streams sit in the UAE’s 5% standard-rated bracket, which fall into the exempt or zero-rated categories, and whether your outbound US services would qualify as zero-rated exports under UAE VAT with full input recovery. We also map the corporate structure — the right free zone or mainland licence, VAT registration threshold, and substance requirements — before anyone talks about relocating.
The Result
On the UAE side, the picture is simple by comparison: one flat 5% standard VAT rate covers most goods and services, including F&B and household and salon services that often escape tax entirely in the US. Exports of services are zero-rated with full input VAT recovery, sovereign government services sit outside the scope of VAT altogether, and residential property largely stays out of the VAT net through zero-rating and exemptions. There’s no state-by-state variation to track and no separate local sales tax layer — one rate, one federal tax authority, and (for most SMEs) a lighter compliance calendar than reconciling exemption certificates across multiple US states.
The Takeaway
"A flat 5% UAE VAT rate beats a fragmented 7.5–10% US sales tax patchwork on paper — but the real savings come from registration, structuring and substance done right, not the headline number alone."
