Calculation of VAT payable to FTA

Article 53 of Federal Decree-Law No. (8) of 2017 on Value Added Tax, describes the method to Calculate UAE VAT Payable to FTA(Federal Tax Authority).

 

Due Tax for a Tax Period 

Article (53) Calculation of Payable Tax

The Payable Tax for any Tax Period shall be calculated as being equal to the total Output Tax payable
pursuant to this Decree-Law and which has been done in the Tax Period less the total Recoverable Tax by
said Taxable Person over the same Tax Period.

The above article States, Your the Output Tax less of Recoverable Input Tax is equal to Tax Payable.

Hence, the formula to Calculate UAE VAT payable is as below:

Output VAT – Recoverable Input VAT = VAT payable

 

From Jan 2018, VAT is all set to be implemented in UAE. It is necessary for businesses to get ready for VAT compliances.

Businesses will have to maintain records, collect and pay VAT, the filing of VAT returns etc. all in accordance with the VAT Law.

Let us understand the above with the help of an example.

You purchase good from a distributor.

Distributor Price – AED 20,000.

5 % VAT Paid – AED 1000.

Purchase price – AED 21,000

Now you sell the above goods to your customers.

Your Price – AED 22000.

5 % VAT Collected – AED 1100.

Your Sale Price = 23100.

How to Calculate UAE VAT Payable?

VAT collected – VAT paid = VAT Payable

AED 1100 – AED 1000 = AED 100

Thus AED 100 is your payable amount to FTA.