UAE VAT Explained: How to Add or Remove 5% VAT
Updated 27 September 2026 · 6 min read
The UAE charges VAT at a standard rate of 5%, so the maths is simple once you know the two formulas. This guide shows how to add VAT to a price, how to pull VAT out of a price that already includes it, and the registration and invoice rules that catch people out.
This is general information, not tax advice. Rules can change, so check with the Federal Tax Authority (FTA) or a registered tax agent for your own situation.
The basics: 5% since 1 January 2018
VAT was introduced across the UAE on 1 January 2018 at a standard rate of 5%, according to the Ministry of Finance. Most goods and services are charged at 5%, but some supplies are zero-rated and some are exempt. The difference matters if you run a business.
- Standard-rated (5%): most goods and services, such as retail purchases, restaurant bills and most professional services.
- Zero-rated (0%): VAT applies, but at 0%. The Ministry of Finance lists examples including exports of goods and services to outside the GCC, international transport, certain investment-grade precious metals (such as 99% pure gold), new residential property supplied for the first time within three years of construction, and designated education and healthcare services.
- Exempt: no VAT is charged. Examples include residential property after its first supply (most home rents fall here), bare land, local passenger transport and certain financial services, as summarised in PwC's UAE tax summary.
The practical difference is on the business side. A company making zero-rated supplies can usually reclaim the VAT it paid on its own costs, while a company making exempt supplies generally can't reclaim the VAT linked to them. For a shopper, both simply mean no VAT on the bill.
How to add 5% VAT to a price
If you have a price before VAT (the net price), multiply it by 1.05 to get the total.
Price including VAT = Net price × 1.05
VAT amount = Net price × 0.05
Example: a freelance designer quotes AED 1,200 before VAT. The VAT is 1,200 × 0.05 = AED 60, so the invoice total is AED 1,260. For AED 18,750 of office furniture, the VAT is AED 937.50 and the total is AED 19,687.50.
How to remove VAT from a VAT-inclusive price
This is where most mistakes happen. If a price already includes 5% VAT, the VAT is not 5% of that price. The price is 105% of the net amount, so the VAT is 5/105 of it.
VAT inside the price = Gross price × 5 ÷ 105
Net price = Gross price ÷ 1.05
Example: a receipt shows AED 1,575 including VAT. The VAT is 1,575 × 5 ÷ 105 = AED 75, and the net price is 1,575 ÷ 1.05 = AED 1,500. Check: 1,500 + 75 = 1,575.
The common error is to take 5% of the gross price: 1,575 × 0.05 = AED 78.75. That overstates the VAT by AED 3.75, and across a year of sales the gap adds up. A handy shortcut: 5/105 is the same as 1/21, so dividing a VAT-inclusive price by 21 gives you the VAT (1,575 ÷ 21 = 75).
| Price including VAT (AED) | VAT (AED) | Net price (AED) |
|---|---|---|
| 105.00 | 5.00 | 100.00 |
| 525.00 | 25.00 | 500.00 |
| 1,050.00 | 50.00 | 1,000.00 |
| 2,499.00 | 119.00 | 2,380.00 |
| 10,000.00 | 476.19 | 9,523.81 |
Rounding: fils matter
The dirham is divided into 100 fils, so VAT amounts are shown to two decimal places. A few practical habits help keep your figures consistent:
- Round the final VAT figure, not every step. For an item priced at AED 19.99 including VAT, the VAT is 19.99 ÷ 21 = 0.9519, which rounds to AED 0.95, leaving a net price of AED 19.04.
- Decide whether you calculate VAT per line or on the invoice total, and stick to it. Three items at AED 3.33 each before VAT give AED 0.17 VAT per line (AED 0.51 in total), but AED 0.50 if you calculate on the AED 9.99 subtotal.
- If your accounting software and your till disagree by a fils or two, check which method each one uses before assuming there's an error. Your accountant can confirm the approach that suits your invoices.
Registration thresholds
According to the FTA's registration guidance, a business must register for VAT when the total value of its taxable supplies and imports over the previous 12 months exceeds the mandatory threshold of AED 375,000. It can choose to register voluntarily when its taxable supplies and imports, or its taxable expenses, over the previous 12 months exceed AED 187,500.
Note that the test looks back over the previous 12 months, not the calendar year, so it's worth checking your running total every month once you get close. Registering voluntarily lets a business reclaim VAT on its costs, but it also brings filing duties, so weigh up the paperwork before you apply.
Tax invoices and e-invoicing
Once registered, you must issue a valid tax invoice for your taxable supplies. The FTA's tax invoice checklist highlights four points: the words "Tax Invoice" shown on the document, your Tax Registration Number (TRN), the amount of VAT charged, and prices displayed inclusive of VAT. The full list of required details is set out in the VAT legislation, and in some situations a simplified tax invoice is allowed, so check the FTA's guidance or ask your accountant before designing your own template.
E-invoicing is also on the way. In May 2026 the Ministry of Finance confirmed that businesses within scope with annual revenue above AED 50 million must implement the e-invoicing system by 1 January 2027, and must appoint an accredited service provider by 30 October 2026. If your revenue is lower, check the Ministry's e-invoicing updates for the dates that apply to you.
Doing it with our VAT Calculator
Our VAT Calculator does both jobs: add 5% to a net price, or extract the VAT and net amount from a VAT-inclusive price. It runs in your browser.
- Open the VAT Calculator and choose whether your figure already includes VAT.
- Enter the amount in AED.
- Read off the VAT, the net price and the total, and round to two decimal places for your invoice.
Be aware of what it doesn't do. It only handles the UAE's 5% rate, so it won't tell you whether an item is zero-rated, exempt or taxable at all. That decision is yours or your accountant's.
If you're setting prices, keep VAT out of your profit maths. Our guide to profit margin vs markup explains why, and the Profit Margin Calculator works on figures excluding VAT.
Frequently asked questions
Is VAT 5% on everything in the UAE?
No. 5% is the standard rate, but some supplies are zero-rated and others, such as most residential rents, are exempt. If you're unsure about a specific item, check the Ministry of Finance guidance or ask the FTA.
How do I find the VAT in a total that already includes VAT?
Multiply the total by 5 and divide by 105, or simply divide by 21. For AED 2,100, the VAT is AED 100 and the net price is AED 2,000.
Do I have to register if my sales are under AED 375,000?
Not under the mandatory threshold. You can choose to register once your taxable supplies and imports, or taxable expenses, exceed AED 187,500 over the previous 12 months.
Which exchange rate applies to a foreign-currency invoice?
The Central Bank of the UAE publishes monthly exchange rates for calculating VAT obligations to the FTA. For US dollars the rate is fixed at 3.6725, as our AED and US dollar peg guide explains.