UAE VAT Calculator

How UAE VAT works in practice

VAT in the UAE is charged at a standard rate of 5% on most goods and services. It is a consumption tax collected by you on behalf of the Federal Tax Authority, so the money you collect is never your revenue. Treating it as revenue is the most common reason a small business gets caught short at filing time.

Adding versus removing VAT

Adding VAT to a net figure is simple: multiply by 1.05. Removing it from a gross figure is where people go wrong, because subtracting 5% is not the inverse. On a VAT-inclusive amount you divide by 1.05, which means the VAT element is roughly 4.76% of the gross figure, not 5%.

On an invoice of AED 10,500 inclusive of VAT, the net is AED 10,000 and the VAT is AED 500. Subtracting 5% from 10,500 would give AED 9,975, which is AED 25 wrong on every invoice.

When do you have to register?

• Mandatory: once taxable turnover exceeds AED 375,000 in the previous 12 months, or you expect to exceed it within the next 30 days.
• Voluntary: available above AED 187,500. Worth considering if your customers are VAT-registered businesses and you incur recoverable input VAT.

The threshold is measured on taxable turnover, not profit, and it is rolling rather than aligned to your financial year. Businesses that grow quickly frequently cross it mid-year without noticing.

Free zones are not automatically exempt

Being in a free zone does not remove you from VAT. Certain Designated Zones receive special treatment for goods moving between them, but services and most transactions remain in scope regardless of where the licence sits. If you are in a free zone and exceeding the threshold, you register like anyone else.

Zero-rated and exempt are different things

Zero-rated supplies are taxable at 0%, and you can still recover input VAT on costs related to them. Exempt supplies carry no VAT and you generally cannot recover related input VAT. Exports of goods and services outside the GCC implementing states are commonly zero-rated, which matters a great deal for consultancies billing overseas clients. The distinction changes your recovery position, so it is worth getting right rather than assuming.

VAT is separate from corporate tax. Corporate tax is charged on profit; VAT is charged on transactions. Registering for one does not register you for the other, and the thresholds and deadlines are unrelated.