Definition

Output VAT is the value-added tax a business charges its customers on taxable supplies of goods and services in the UAE. It represents the VAT collected on behalf of the Federal Tax Authority (FTA) and must be reported and paid in the VAT return.

Key points

• Standard VAT rate: 5% on most goods and services.
• Must be shown clearly on tax invoices along with the supplier’s TRN.
• Businesses act as tax collectors, charging VAT on sales and remitting it to the FTA.
• Declared in the VAT Return (Form VAT201) in the section for supplies by Emirate.

Practical example

A retailer sells electronics worth AED 10,000. Output VAT is AED 500 (10,000 × 5%), collected from the customer and later paid to the FTA.

Why it matters

Output VAT is the foundation of VAT compliance. Businesses must calculate it accurately, ensure invoices meet requirements, and avoid underreporting to prevent penalties.