Value Added Tax (VAT) was introduced in the UAE on 1 January 2018.
​The rate of VAT is 5 per cent. ​

What is VAT?
Value Added Tax (VAT) is the tax levied at every level of value addition done to the product across the supply chain. It is levied at every point of sale from manufacturer till it is sold to an end consumer. This achieved by allowing tax paid on purchase known 'Input Tax Credit' or also known as 'input VAT' to be adjusted with the VAT collected on sales knows as 'Output VAT'. Ultimately, the entire tax is paid by the end user of the goods and services. 

What is unique characteristic of VAT? 
It is worth to note that the VAT is a consumption based tax with the provision to allow Input tax credit -Tax paid on purchases to be utilized or set-off against the VAT liability Tax collected on Sale. If there is any balance liability after adjustment, the same needs to be paid to the government.

What is Input Tax Credit ? 
​Taking the set off of the the VAT paid on the purchase of the goods and services against the VAT collected upon the sale of the goods and services is called taking of Input Tax Credit. 

Is VAT Direct Tax of Indirect Tax ? 
VAT is classified as Indirect Tax.  Indirect Taxes is type of tax in which the incidence of tax and burden of tax is on the different person or business entity. This typically levied on various economic activity like manufacturing, sales, services etc. Whereas Direct Taxes is type of tax in which the incidence of tax and burden of tax is on the same person or business entity. These taxes are typically levied on the income of an individual or business entity.