What is VAT in the UAE?
Value Added Tax, or VAT, is a tax on spending. It is added at each step where goods or services are sold, from the factory to the shop counter. In the UAE the standard rate is 5%. It started on 1 January 2018 and the rate has stayed the same since then.
For a shopper, VAT is simple. It is already inside the price on the shelf or the menu, because UAE law requires prices shown to consumers to include VAT. For a business, VAT is more work. A registered business charges VAT on its sales (output tax), pays VAT on its own purchases (input tax) and sends the difference to the Federal Tax Authority (FTA).
That is why two calculations come up again and again. A supplier needs to add 5% to a net price to write a quote or an invoice. A buyer or an accountant often needs to go the other way and find how much VAT sits inside a receipt. This calculator does both.
Who pays VAT and who must register?
Everyone who buys taxable goods or services in the UAE pays VAT as part of the price. That includes residents, visitors and companies. Only businesses that are registered with the FTA collect it and pay it over. Registration depends on the value of your taxable supplies and imports.
Mandatory registration: AED 375,000
A business that lives in the UAE must register when the value of its taxable supplies and imports went over AED 375,000 in the previous 12 months. It must also register if it expects to go over that figure in the next 30 days. The FTA calls these the look-back test and the look-ahead test. Taxable supplies include both standard-rated and zero-rated sales. Exempt sales do not count.
Voluntary registration: AED 187,500
A business may choose to register if its taxable supplies and imports, or its taxable expenses, went over AED 187,500 in the past 12 months, or are expected to in the next 30 days. Start-ups with high set-up costs often register early so they can recover the VAT on those costs.
Non-resident businesses
The AED 375,000 threshold does not protect a foreign business. A non-resident that makes taxable supplies in the UAE, and where no one else in the UAE must account for the VAT under the reverse charge, has to register from the first sale.
All FTA services now run through the EmaraTax platform, and you sign in with UAE Pass. Once registered, you receive a Tax Registration Number (TRN). That 15-digit number must appear on your tax invoices.
The law behind UAE VAT
The main law is Federal Decree-Law No. 8 of 2017 on Value Added Tax. The detail sits in its Executive Regulation, issued by Cabinet Decision No. 52 of 2017 and amended several times since. The rules on registration procedures, audits, objections and penalties come from the Tax Procedures Law, now Federal Decree-Law No. 28 of 2022. The UAE VAT system is also based on the GCC Common VAT Agreement signed by the six Gulf states.
The Ministry of Finance writes tax policy. The Federal Tax Authority runs the system: it registers businesses, collects tax, issues guides and carries out audits.
What changed on 1 January 2026
Federal Decree-Law No. 16 of 2025 amended the VAT law with effect from 1 January 2026. The main points, in simple words:
- No more self-invoices for reverse charge. When you account for VAT on imported services or certain goods under the reverse charge, you no longer have to issue an invoice to yourself. You must still keep the supporting documents.
- Five-year limit on excess refunds. If you have excess refundable tax, you have five years to ask for it back. After that the right ends.
- Input tax and tax evasion. The FTA may refuse input tax recovery if the purchase was part of a tax evasion chain. Businesses are expected to check that their suppliers and deals are genuine.
A new penalties decision, Cabinet Decision No. 129 of 2025, also started on 14 April 2026. We cover it in the penalties section below. The 5% rate itself did not change.
How to calculate VAT in the UAE: the formulas
There are only two formulas you need. The calculator uses exactly these, with the rate you enter (5% by default).
Adding VAT to a net amount
Total including VAT = Net amount + VAT = Net amount × 1.05
So to add VAT, you multiply by 1.05. For AED 200, the VAT is AED 10 and the total is AED 210.
Removing VAT from a VAT-inclusive amount
Net amount = Gross amount ÷ 1.05 = Gross amount − VAT
So to remove VAT, you divide by 1.05. Another way to say the same thing: the VAT inside any UAE price is one twenty-first of the total, which is about 4.76%. It is not 5%.
With a quantity
Then apply the add or remove formula to the line amount
The calculator first multiplies the price by the quantity, rounds that to two decimals, and then works out the VAT once on the full line. This matches how most invoicing software calculates VAT per line.
Rounding
The dirham has 100 fils, so money is shown to two decimals. The tool rounds the VAT to the nearest fils and then works out the other figure from it, so net plus VAT always equals the total exactly.
Worked examples
You can type each example into the calculator above and you will see the same numbers.
Example 1: Adding VAT to a quote
Sana runs a small design studio in Sharjah and is VAT registered. She quotes AED 1,200 for a logo, before VAT.
- VAT: 1,200 × 5 ÷ 100 = AED 60.00
- Total to invoice: 1,200 + 60 = AED 1,260.00
Example 2: Finding the VAT inside a receipt
A company buys a laptop for AED 3,150. The receipt total already includes VAT. The accountant needs the input tax figure.
- VAT: 3,150 × 5 ÷ 105 = AED 150.00
- Net amount: 3,150 − 150 = AED 3,000.00
Notice that 5% of 3,150 would be AED 157.50, which is wrong. The correct VAT is AED 150.
Example 3: Using quantity
A wholesaler sells 12 cartons of cleaning supplies at AED 85 each, before VAT.
- Line amount: 85 × 12 = AED 1,020.00
- VAT: 1,020 × 0.05 = AED 51.00
- Total: AED 1,071.00
Example 4: An odd price with rounding
A phone case costs AED 99.99 in a shop, VAT included. How much of that is VAT?
- VAT: 99.99 × 5 ÷ 105 = 4.7614, rounded to AED 4.76
- Net amount: 99.99 − 4.76 = AED 95.23
Standard-rated, zero-rated and exempt supplies
Not every sale in the UAE carries 5% VAT. The law has three main groups. The difference between zero-rated and exempt matters a lot to businesses, even though the customer pays no VAT in both cases.
| Type | VAT charged | Can the seller recover input VAT? | Common examples |
|---|---|---|---|
| Standard-rated | 5% | Yes | Most goods, restaurant meals, hotel stays, commercial rent, professional services, cars, electronics |
| Zero-rated | 0% | Yes | Exports outside the GCC, international transport of passengers and goods, investment-grade gold, silver and platinum (99% purity), first supply of a new residential building within three years of completion, many education and healthcare services, certain crude oil and natural gas |
| Exempt | None | No | Residential rent after the first supply, bare land, local passenger transport such as buses and taxis, certain financial services where no explicit fee is charged (for example interest on a loan) |
| Outside scope | None | Depends | Salaries, most government sovereign activities, transfer of a whole business as a going concern in some cases |
The exact conditions for each item are detailed in the Executive Regulation and in FTA guides. For example, education is zero-rated only for recognised institutions and for core tuition, while things like uniforms or trips can be standard-rated. Healthcare is zero-rated for preventive and basic care, but cosmetic treatment is usually taxed at 5%. When in doubt, read the FTA guide for that sector.
To use the calculator for a zero-rated item, simply change the rate to 0. The VAT will show as zero.
Tax invoices and VAT returns
Tax invoices
A registered business must issue a tax invoice for taxable supplies, normally within 14 days of the date of supply. A full tax invoice should show, among other things:
- the words "Tax Invoice" in a clear place;
- the supplier's name, address and TRN;
- the buyer's name, address and TRN, if the buyer is registered;
- a unique invoice number and the date of issue;
- a description of the goods or services, the quantity and unit price;
- the rate of tax and the amount of VAT in AED.
A shorter simplified tax invoice is allowed in some cases, such as sales to customers who are not registered, or sales below AED 10,000. A tax credit note is used when you reduce the price after an invoice, for example on a return.
E-invoicing is coming
Ministerial Decisions No. 243 and No. 244 of 2025 set up a national e-invoicing system. A pilot started on 1 July 2026. Businesses with revenue of AED 50 million or more must use e-invoicing from 1 January 2027. Businesses below that figure follow from 1 July 2027, and government bodies from 1 October 2027. Each business must work through an accredited service provider. Check the Ministry of Finance announcements for the latest dates before you plan.
VAT returns
Most businesses file VAT returns every quarter. Some are placed on monthly returns by the FTA. The return and the payment are due no later than the 28th day after the end of the tax period. You file the return on EmaraTax and pay through the portal by card, bank transfer or another listed channel. Keep your records, including invoices and contracts, for at least five years. Records about real estate must be kept for longer.
VAT refund for tourists
Visitors to the UAE can claim back most of the VAT they paid on goods they take home. The UAE was the first GCC country to start this scheme, and it is run by Planet on behalf of the FTA. The main rules are:
- You must be a tourist (not a UAE resident) and at least 18 years old.
- Buy from a shop that is part of the Tax Refund for Tourists scheme. Look for the tax-free sign.
- Each purchase must be at least AED 250, including VAT.
- The shop scans your passport and links the purchase to you digitally.
- You must validate the purchase at an airport, seaport or land border within 90 days of buying it. You must still have the goods with you, unused.
- You can take the refund in cash (up to a limit) or back to a card.
You do not get the full 5% back. The operator keeps a share of the VAT and a small fixed fee per transaction. At the time of writing, Planet says tourists receive 87% of the VAT less a fixed fee. These figures have changed more than once since 2018, so check the latest terms at the refund counter or on the official UAE Government portal.
Things you use in the UAE, such as hotel stays, meals and car rental, do not qualify. Goods that are fully or partly consumed before you leave also do not qualify.
Special cases
Residential and commercial property
Rent on a home is generally exempt. The first sale or lease of a new residential building within three years of completion is zero-rated, and later sales of homes are exempt. Commercial property, such as offices, shops and warehouses, is standard-rated at 5%. If you are buying property in Dubai, VAT is only part of the cost. See our Dubai Property Transfer Fee Calculator for the land department fee.
Designated zones
Some free zones are listed as designated zones. Movement of goods inside or between designated zones can be outside the scope of VAT, if strict conditions are met. Services in those zones are normally taxed in the usual way. Being in a free zone does not by itself mean you are free of VAT.
Reverse charge on services from abroad
If a UAE registered business buys services from a supplier outside the UAE, it usually accounts for the VAT itself under the reverse charge. Since 1 January 2026 no self-invoice is needed, but the supporting documents must be kept.
Corporate tax is a separate tax
VAT is not the same as corporate tax. A company may be registered for both. For the profit-based tax, use our UAE Corporate Tax Calculator.
UAE VAT penalties in 2026
Penalties for tax breaches are set by Cabinet decision. The current schedule follows Cabinet Decision No. 129 of 2025, which applies from 14 April 2026. Some of the main amounts are below. This is a summary only; always check the official schedule.
| Breach | Penalty (summary) |
|---|---|
| Late payment of tax | 14% a year on the unpaid tax, worked out monthly. This replaced the older 2% plus 4% per month system. |
| Failing to register on time | AED 10,000 |
| Late VAT return | AED 1,000 the first time, AED 2,000 for a repeat within 24 months |
| Not issuing a tax invoice or credit note on time | AED 2,500 for each case |
| Incorrect return | AED 500 the first time, AED 2,000 for a repeat (waived if corrected in time in some cases) |
| Voluntary disclosure of an error | 1% per month on the tax difference; a fixed 15% plus monthly amount if made after an audit notice |
| Not keeping required records | AED 10,000, or AED 20,000 for a repeat |
The FTA has run penalty waiver and reduction schemes in the past. If you have old penalties, ask the FTA or a registered tax agent whether any current scheme helps you.
Common mistakes when calculating VAT in the UAE
- Taking 5% off a gross price. To remove VAT, divide by 1.05. Taking 5% off the total gives a VAT figure that is too high.
- Adding VAT twice. Retail prices already include VAT. Do not add 5% on top of a shelf price.
- Mixing up zero-rated and exempt. Both mean the customer pays no VAT, but only zero-rated sellers can recover their input VAT.
- Charging VAT without a TRN. Only registered businesses may charge VAT. An unregistered seller who shows VAT on an invoice breaks the law.
- Missing the threshold date. Registration is based on a rolling 12 months, not the calendar year. Check every month.
- Claiming input VAT on blocked items. VAT on some costs, such as entertainment for people who are not staff, and some cars that are available for personal use, cannot be recovered.
- Rounding each item but invoicing the total. Pick one method, per line or per invoice, and use it every time.
Practical tips and how to get official help
- When you quote prices to the public, show the VAT-inclusive price. That is the law for consumer prices.
- For business quotes, say clearly whether the price is "plus VAT" or "including VAT". Many disputes start here.
- Keep a simple monthly log of your taxable sales. It shows quickly when you are close to AED 375,000.
- If you are a freelancer on a salary as well, salaries are outside VAT. Only your business income counts. Our UAE Salary Calculator can help you plan the employment side.
- Moving business to Saudi Arabia? The rate there is 15%, not 5%. Use our Saudi VAT Calculator.
- Use only FTA-registered tax agents if you need someone to act for you.
Official help: the Federal Tax Authority website (tax.gov.ae) has guides, public clarifications and the EmaraTax portal. The FTA call centre and the Ministry of Finance website also publish updates. For tourist refunds, use the counters at the airport or the official UAE Government portal.
Frequently asked questions
What is the VAT rate in the UAE in 2026?
The standard rate is still 5%. It has not changed since VAT started on 1 January 2018. Some supplies are zero-rated (0%) and some are exempt.
How do I calculate 5% VAT on a price?
Multiply the net price by 0.05 to get the VAT, or multiply it by 1.05 to get the total including VAT. For AED 1,200 the VAT is AED 60 and the total is AED 1,260.
How do I remove VAT from a total in the UAE?
Divide the VAT-inclusive total by 1.05 to get the net amount. The VAT is the total multiplied by 5 and divided by 105. For AED 3,150 the net amount is AED 3,000 and the VAT is AED 150.
Why is VAT not 5% of the total price?
Because the 5% is charged on the net price, not on the total. Inside a VAT-inclusive price, VAT is 5/105 of the total, which is about 4.76%. Taking 5% off the total removes slightly too much.
When must a business register for VAT in the UAE?
A resident business must register when its taxable supplies and imports in the last 12 months went over AED 375,000, or are expected to go over that amount in the next 30 days. It may register voluntarily from AED 187,500.
Do individuals pay VAT in the UAE?
Yes, as consumers. VAT is built into most prices you pay in shops, restaurants and online. Individuals only register for VAT if they run a business whose taxable sales pass the registration threshold.
Is rent subject to VAT in the UAE?
Residential rent is generally exempt, so tenants of homes do not pay VAT on rent. Commercial rent, such as offices and shops, is taxed at 5%. Service charges and other fees can be treated differently.
Can tourists get VAT back in the UAE?
Yes. Visitors who buy goods worth at least AED 250 from shops in the Tax Refund for Tourists scheme can claim most of the VAT back when they leave, after a small fee. Purchases must be validated at the exit point within 90 days.
What changed in UAE VAT law in 2026?
Federal Decree-Law No. 16 of 2025 took effect on 1 January 2026. It removed the need to issue self-invoices under the reverse charge, set a five-year limit for reclaiming excess refundable tax, and lets the FTA deny input tax linked to tax evasion. New penalty rules also started on 14 April 2026.
Can I change the VAT rate in this calculator?
Yes. The rate field is set to 5% but you can edit it. Use 0 for zero-rated items, or another rate if you want to compare with other GCC countries such as Saudi Arabia at 15%.
Disclaimer
This calculator and guide are for general information only. They are not tax advice. VAT treatment depends on the exact facts of each supply, and the rules can change. For your own business, check the latest FTA guidance or speak to an FTA-registered tax agent.
Sources and references
Federal Decree-Law No. 8 of 2017 on Value Added Tax and its Executive Regulation (Cabinet Decision No. 52 of 2017, as amended); Federal Decree-Law No. 16 of 2025 amending the VAT law (in force 1 January 2026); Federal Decree-Law No. 28 of 2022 on Tax Procedures; Cabinet Decision No. 129 of 2025 on administrative penalties (from 14 April 2026); Ministerial Decisions No. 243 and 244 of 2025 on e-invoicing. Official pages: Federal Tax Authority – Registration for VAT; UAE Government portal – VAT refund for tourists; WAM – Ministry of Finance on the 2026 VAT amendments.