How Does VAT Payment Process Works In UAE?

Applicable from 1st January 2018, the businesses, who are registered under VAT UAE regime, have to pay VAT at 5% rate on the taxable supplies of goods and services rendered. The question must be in your mind, what is VAT payment exactly?

Here is the answer, the VAT payment in UAE means the payment of the tax, which is collected by the registered taxpayer under VAT UAE at the time of sale, to the UAE government. In the same manner, the businesses have to pay 5% VAT as well while purchasing the product from the supplier.

Read more: Process of Making VAT Payments in UAE using GIBAN

It is the certain truth that the registered businesses collect the VAT and needs to pay to the government back. But, how much is the main question? Do one has to return the entire amount of tax collected from the sales to the government? Is there any particular method or way to calculate the VAT payable to the UAE government?

You must be very eager to know the answers and amazingly, we have got the answers in detail to all your queries as well.

First, let’s distinguish the term generally used in VAT payment and they are ‘Output VAT’ and ‘Input VAT’ in terms of UAE government.

Output VAT term comes in focus when the business collects tax from buyers by selling goods and services. Contradictorily, Input VAT refers to the amount of tax given by the business at the time of purchasing from the supplier. The Input VAT paid by the business will be paid back to the government by the supplier. Consequently, the Input VAT benefits are provided to the buyer or business and further, they get a chance to adjust the Input VAT with the Output VAT and refund the remaining to the government back.

How Does The VAT System Work?

By aforementioned definitions, you are quite comfortable now to understand the process as you are already half-way. But, still, restrictions and conditions are important to consider before claiming for Input tax.

Calculate VAT Payment In UAE With Ease

To determine the VAT payment to UAE government, all you required is to first figure out the total Output VAT gathered during the particular tax period and total Input VAT which you have to recover. After calculating, put the terms in the below-given formula:
VAT Payment = Output VAT – (minus) Input VAT

For example, the Output VAT is AED 300,000 and Input VAT is AED 200,000 for a particular business. Then, the adjustment of the Output VAT with Input VAT will work like this:

Output VAT AED 300,000 – (Minus) Input VAT AED 200,000 = AED 100,000

Here, AED 100,000 is the VAT required to pay to the government. Very easy, isn’t it?

But, What If Input VAT Exceeds The Output VAT?

In some instances, it is also the case when Input VAT is more than the Output VAT. In that case, the remaining amount will be refundable to the concerned business in terms of carried forward to the next return period or adjusted against the future VAT liabilities as well.

How Does VAT Payment Online Work?

The VAT payment is calculated after completing the Input VAT as well as Output VAT and requires to be paid on the FTA portal. The Online VAT payment accommodation will be available in the FTA portal, where the registered businesses can exempt the VAT payable.

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