What is VAT in UAE ?

VAT stands for Value Added Tax. It's a consumption tax introduced in the UAE in January 2018. VAT-registered businesses collect tax on behalf of the government at a standard rate of 5% on most goods and services sold.

VAT Calculation Formula

The VAT calculation formula differs based on the type of sale price, such as:

Sale price exclusive of VAT

Sale price inclusive of VAT    
If the sale price is exclusive of VAT

The below formulas can be used to add the VAT to the sale price:

A. VAT Amount = Sale price × VAT rate

B. Gross Amount = Sale price × (1 + VAT rate)

If the sale price is inclusive of VAT

Below formulas can be used to exclude VAT from the sale price:

A. VAT Amount = Sale price × [VAT rate / (1 + VAT rate)]

B. Net Sale amount = Sale price/ (1 + VAT rate)

VAT Calculation Example

Let's say you buy a gadget for AED 100 on which 5% VAT is applicable. VAT would be as follows in different scenarios:

When the sale price is exclusive of VAT:

VAT = AED 100 × 5% = AED 5

Gross Amount = AED 100 × (1 + 5%) = AED 105

When the sale price is inclusive of VAT:

VAT = AED 100 × [5% / (1+5%)] = AED 4.76

Net Sale amount = AED 100 / (1 + 5%) = AED 95.24    

How to Use ClearTax VAT calculator

A VAT calculator can easily determine the amount of VAT included in a price or the final price after adding VAT.

Here's the step-by-step process:

Use the slider for selecting the value of taxable goods or services (Sale price)

Move the slider to set the VAT rate

Use the button to choose inclusive or exclusive VAT

Move the slider to re-enter the values