Key takeaways
- The UAE introduced VAT at a standard rate of 5% on 1 January 2018.
- To add VAT, multiply the net amount by 1.05. To extract VAT from a total, divide the total by 1.05.
- Taking 5% of a VAT-inclusive total overstates the VAT. It is a common invoicing mistake.
- Mandatory registration applies above AED 375,000 of taxable supplies a year; voluntary registration from AED 187,500.
On this page
This article explains the arithmetic of VAT. It is not tax advice. Rules, exemptions and zero-rated categories are set by the UAE Federal Tax Authority; check the FTA or a registered tax agent for your situation.
The basics
Value Added Tax (VAT) is charged on most goods and services in the UAE at a standard rate of 5%, in force since 1 January 2018. Some supplies are zero-rated (for example certain exports, international transport and some education and healthcare) and some are exempt (for example certain financial services and residential property). The arithmetic below applies to standard-rated items.
Adding VAT to a price
When a price is net (excludes VAT): VAT = net × 0.05 and total = net × 1.05.
| Net price | VAT (5%) | Total |
|---|---|---|
| AED 100 | AED 5.00 | AED 105.00 |
| AED 2,400 | AED 120.00 | AED 2,520.00 |
| AED 18,750 | AED 937.50 | AED 19,687.50 |
Removing VAT from a total
When a price already includes VAT, divide, do not subtract 5%: net = total ÷ 1.05 and VAT = total − net (equivalently total × 5/105).
Example: a receipt for AED 1,050 contains AED 1,050 ÷ 1.05 = AED 1,000 net and AED 50 VAT. Taking 5% of 1,050 gives 52.50, which is wrong. Over many invoices, this mistake adds up.
Do it instantly
The VAT calculator does both directions, with presets for the UAE (5%), Saudi Arabia (15%), Bahrain (10%), Oman (5%) and other countries. For discounts before tax, use the discount calculator, which applies VAT after the discount, as shops do.
Do I need to register?
Businesses must register for VAT when taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to in the next 30 days. Voluntary registration is possible above AED 187,500. Registration, returns and record-keeping are managed through the FTA's online services (EmaraTax).
Rounding
Calculate VAT per line or per invoice consistently, and round to two decimal places (fils). Small rounding differences between methods are normal; what matters is applying one method consistently and matching your accounting software.
Sources
Fact-checked against the sources above. We test every tool we mention. Editorial policy.
