How to calculate VAT in UAE

By | July 25, 2023


A value-added tax (VAT) is a form of tax that is levied gradually. It is applied to the price of a product or service. Usually applied at each stage of manufacture, distribution, or sale to the end user. The final customer can reclaim the VAT tax paid if they are a firm that collects and pays VAT to the government on their products or services. It is comparable to and frequently compared to a sales tax. VAT is an indirect tax. Since the individual who ultimately suffers the tax burden is not always the same person who pays the tax to the tax authorities.

vat how to calculate


A federation of seven Emirates, the United Arab Emirates has independent federal and local administrations. The Emirates of the UAE has issued an income tax decree. Apparently, this enforcement is limited to international banks and oil firms in reality.

The UAE government adopted value-added tax (VAT) in the nation on January 1, 2018, at a standard rate of 5%. The UAE government announced the establishment of a federal business tax in January 2022. The basic corporation tax rate will be 9% for enterprises with net annual earnings of AED 375,000 or more. And 0% for businesses with net annual profits less than AED 375,000. The statement includes a 15% corporation tax rate for multinational businesses with annual earnings of more than 750 million Euros. Which ideally is consistent with the Global Minimum Corporate Tax Rate Agreement.

The nation intends to begin implementing the corporation tax regime on June 1, 2023. Mainland businesses must additionally pay a proportion of their earnings to a local business. This is based on the area in which they operate. In the UAE, there are additional sin taxes on alcohol, energy drinks, vapes, and cigarettes.

How to calculate VAT in UAE

You may calculate VAT the taxable value using the VAT calculator. All you need to know to calculate VAT is the amount, i.e. the price, and the VAT rate. You may compute exclusive and inclusive VAT using the VAT calculator. To calculate VAT the formula is as follows: VAT = Value Added Tax = Output Tax – Input Tax

Calculate VAT Exclusive

The amount or price you enter is exclusive of VAT. The true cost of the goods or services is exclusive of VAT. You choose exclusive of VAT, and to calculate VAT rate use the formula shown below.

Taxable Value = VAT Rate ÷ 100

Calculate VAT Inclusive

In this case, the quantity or price indicated includes VAT. In other words, it covers both the cost of the goods and the calculate VAT amount, where the advertised price includes VAT. To calculate VAT amount use the following formula:

VAT amount = Value inclusive of tax X tax rate ÷ (100 + tax rate)

Taxable Value/Price = Value inclusive of tax X 100 ÷ (100 + tax rate)


VAT Calculator

The rate of 5% is used to calculate VAT in UAE, which is one of the lowest rates in the world. The UAE government does not actively collect the tax; instead, dealers or businesses are responsible for charging the VAT to their clients. A value-added tax is often an indirect consumption tax. In indirect tax to calculate VAT, it is required to keep records of every transaction in which VAT is paid.

All you need to do here is compute your total output, to calculate VAT collected during the tax period and the total input VAT that you may recover. Apply the aforementioned formula once you’ve computed the output and input VAT.

If your output VAT exceeds your input VAT, the difference is the VAT payable. If the output VAT is less than the input VAT, then no VAT will be due.

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Corporate Tax in UAE


Calculate VAT with online VAT calculator, if you are looking for a quick solution. Understanding VAT theory all at once is a challenging endeavor. Penieltech can assist you to understand and calculate VAT. We provide the highest level of accuracy to avoid large penalties and legal ramifications from FTA in UAE. Our VAT specialists can help you ensure the accuracy of your computations for better financial management.

Penieltech believes in working together with our valued clients. We will provide you with the most recent information and best practices. More firms have registered for the value-added tax (VAT) in recent months. Since the Federal Tax Authority (FTA) mandated VAT registration.

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