The standard VAT rate in the UAE is 5%. To add VAT to a price, multiply it by 0.05; to find the VAT inside a price that already includes it, multiply by 5/105. This guide covers both formulas, how discounts, imports and exports change the calculation, and how to work out the net VAT you owe the Federal Tax Authority (FTA) each period.
The Two Core Formulas
| You Have | You Want | Formula |
| Price before VAT | VAT amount | Price × 0.05 |
| Price before VAT | Total including VAT | Price × 1.05 |
| Price including VAT | VAT amount | Price × 5 ÷ 105 |
| Price including VAT | Price before VAT | Price ÷ 1.05 |
Example 1: Adding VAT to a Price
A service is priced at AED 10,000 before VAT.
- VAT: 10,000 × 0.05 = AED 500
- Total invoiced: 10,000 + 500 = AED 10,500
Example 2: Extracting VAT from an Inclusive Price
A receipt shows AED 1,050 including VAT.
- VAT: 1,050 × 5 ÷ 105 = AED 50
- Price before VAT: 1,050 ÷ 1.05 = AED 1,000
A common mistake is taking 5% of the inclusive price. 1,050 × 5% = 52.50, which overstates the VAT by AED 2.50. Always divide by 1.05 first, or multiply by 5/105.
Example 3: Discounts
VAT is charged on the price actually charged, so a discount given at the point of sale reduces the VAT. On a AED 10,000 service with a 10% discount:
- Discounted price: 10,000 − 1,000 = AED 9,000
- VAT: 9,000 × 0.05 = AED 450
- Total: AED 9,450
Calculating the VAT You Owe: Output Minus Input
Your VAT return is not the total VAT on your sales. It is the difference between two figures:
- Output VAT — VAT you charged customers on your sales
- Input VAT — VAT you paid suppliers on business purchases, where recoverable
Net VAT payable = Output VAT − Recoverable Input VAT
Example 4: A Quarterly Return
| Item | Net Amount | VAT at 5% |
| Sales for the quarter | AED 400,000 | AED 20,000 (output) |
| Business purchases | AED 150,000 | AED 7,500 (input) |
| Net VAT payable to the FTA | AED 12,500 |
If input VAT is higher than output VAT for the period, the difference is a refund position — it can be carried forward or claimed from the FTA.
Read more: Input VAT and Output VAT Explained, with Journal Entries
Zero-Rated vs Exempt: Why It Changes Your Calculation
Both zero-rated and exempt supplies carry no VAT on the sale, but they are treated very differently in your return:
| Zero-Rated (0%) | Exempt | |
| VAT charged on the sale | 0% | None |
| Input VAT on related costs | Recoverable | Not recoverable |
| Reported on the VAT return | Yes | Yes, as exempt supplies |
Classifying a supply wrongly is one of the most common causes of errors in VAT returns, because it changes how much input VAT you can recover. Which goods and services fall into each category is set out in the VAT Decree-Law.
Read more: UAE VAT Exemptions and Zero-Rated Supplies
Partial Exemption: Businesses with Mixed Supplies
A business that makes both taxable and exempt supplies — some banks and property companies, for example — cannot recover all of its input VAT. Input VAT that relates directly to taxable supplies is recoverable in full; input VAT on shared overheads is apportioned, typically by the ratio of taxable supplies to total supplies. The remainder, relating to exempt supplies, is a cost to the business.
Imports and Exports
- Imports — VAT is calculated on the value of the goods for customs purposes, plus any customs duty. A VAT-registered importer accounts for this through the reverse charge on the VAT return, rather than paying it at the border.
- Exports — qualifying exports of goods and services are zero-rated, provided you keep evidence that the conditions are met: shipping documents for goods, and contracts and proof of the recipient’s location for services.
Read more: Reverse Charge Mechanism in UAE VAT
Automate VAT Calculation with mazeed
mazeed calculates VAT on every invoice and bill automatically, separates output and input VAT, and prepares your return — with FTA-certified tax experts on hand to review classification and recovery.
Related Guides
- How to Register for VAT in the UAE
- How to File a VAT Return in the UAE
- VAT Late Payment Penalties in the UAE
- VAT Audit Report in the UAE
- How to Claim a VAT Refund at Dubai Airport
FAQs about UAE VAT Calculation
How do I calculate 5% VAT in the UAE?
Multiply the price before VAT by 0.05 to get the VAT amount, or by 1.05 to get the total including VAT. On AED 100, VAT is AED 5 and the total is AED 105.
How do I calculate VAT from a price that already includes it?
Multiply the VAT-inclusive price by 5 and divide by 105. On AED 1,050 including VAT, the VAT is AED 50 and the price before VAT is AED 1,000. Taking 5% of the inclusive price overstates the VAT.
How do I calculate the VAT I owe the FTA?
Subtract the recoverable input VAT you paid on business purchases from the output VAT you charged on sales for the period. A positive figure is payable; a negative figure is a refund position.
Is VAT calculated before or after a discount?
After. VAT is charged on the price actually charged, so a discount given at the point of sale reduces the VAT due.
What is the difference between zero-rated and exempt supplies for VAT calculation?
Neither carries VAT on the sale, but input VAT on costs relating to zero-rated supplies is recoverable, while input VAT relating to exempt supplies is not.
How is VAT calculated on imports?
On the value of the goods for customs purposes plus customs duty. VAT-registered importers account for it through the reverse charge on their VAT return.
Disclaimer: This publication is for informational purposes only and should not be considered professional or legal advice. mazeed, its members, employees, and agents do not accept or assume any liability, responsibility, or duty of care for any actions taken or decisions made based on this content. For official tax guidance, please refer to the UAE Ministry of Finance and the Federal Tax Authority.
