How to Calculate VAT Payable or Refundable

📊 How to Calculate VAT Payable or Refundable in the UAE

Understanding how to calculate VAT (Value Added Tax) payable or refundable is a fundamental part of doing business in the UAE. Since the introduction of VAT at a standard rate of 5% in 2018, businesses must accurately compute their VAT obligations to remain compliant with the Federal Tax Authority (FTA) and avoid penalties.

In this blog, we’ll walk you through the step-by-step process of calculating VAT payable or refundable and help you stay on top of your VAT responsibilities.

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📌 What Is VAT Payable?

VAT payable is the amount a business owes to the FTA after offsetting the Input VAT (VAT paid on purchases) against the Output VAT (VAT collected on sales).

🔹 Output VAT

This is the VAT collected from customers on taxable supplies (goods/services sold).

Formula:

Output VAT = Total Taxable Sales × 5%

🔹 Input VAT

This is the VAT paid to suppliers on business-related purchases and expenses.

Formula:

Input VAT = Total Taxable Purchases × 5%

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✅ How to Calculate VAT Payable or Refundable

Step 1: Calculate Total Output VAT

Add up all VAT collected from your taxable sales during the VAT period.

Step 2: Calculate Total Input VAT

Add up all VAT paid on eligible business purchases and expenses during the same period.

Step 3: Subtract Input VAT from Output VAT

Formula:

VAT Payable (or Refundable) = Output VAT – Input VAT

Results:

• If Output VAT > Input VAT → You must pay the difference to the FTA.

• If Input VAT > Output VAT → You are eligible for a refund or the amount will be carried forward to the next VAT period.

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💡 Example: VAT Payable Calculation

Particulars Amount (AED)

Total Taxable Sales 100,000

Output VAT (5%) 5,000

Total Taxable Purchases 60,000

Input VAT (5%) 3,000

VAT Payable = 5,000 – 3,000 = AED 2,000

This amount must be paid to the FTA.

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💡 Example: VAT Refundable Calculation

Particulars Amount (AED)

Total Taxable Sales 50,000

Output VAT (5%) 2,500

Total Taxable Purchases 70,000

Input VAT (5%) 3,500

VAT Refundable = 2,500 – 3,500 = AED (–1,000)

You can claim a refund or carry the AED 1,000 forward.

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❌ Common Mistakes to Avoid

• Including exempt supplies in VAT calculations

• Claiming non-eligible input VAT, like personal expenses

• Forgetting to adjust for zero-rated or reverse charge supplies

• Not maintaining proper tax invoices and records

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🧾 Documents Required for Accurate Calculation

To calculate VAT accurately, maintain:

• Valid tax invoices

• Purchase records with VAT details

• Records of zero-rated, exempt, and export transactions

• Credit and debit notes

• VAT return summary from EmaraTax

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📌 Filing and Payment Timeline

VAT returns must be filed monthly or quarterly, and any payable amount must be paid by the 28th of the following month after the VAT period ends.

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📞 Need Assistance?

Whether your business is due for a VAT payment or expecting a refund, accurate VAT calculation is key to compliance and financial planning. At Sheikh Anwar Accounting & Auditing LLC, we help you:

• Prepare accurate VAT returns

• Reconcile input/output VAT

• Submit refund claims

• Avoid penalties through professional compliance

📍 Dubai, UAE

📞 +971 58 562 1786

🌐 www.sa-auditors.com