UAE VAT is charged at a standard rate of 5% and is administered by the Federal Tax Authority (FTA). The rate is simple; restaurant operations are not. Here are the errors we see most often in F&B and how to avoid them.
1. Getting the VAT wrong on inclusive prices
Most UAE menus show prices including VAT. The VAT inside an inclusive price is not 5% of that price. It is 5/105 of it.
Worked example: one AED 50 dish
| Method | VAT (AED) | Net (AED) |
|---|
| Correct: 50 × 5 ÷ 105 | 2.38 | 47.62 |
| Wrong: 5% of 50 | 2.50 | 47.50 |
The difference is 12 fils per dish. Across 8,000 dishes a month it becomes about AED 960 of VAT reported incorrectly, and a net sales figure that does not match your POS.
Fix: configure the POS to calculate VAT on an inclusive basis and use its VAT report, not a manual percentage.
2. Declaring VAT only on the delivery app payout
Sales through apps such as Talabat, Deliveroo, Careem or Noon Food arrive as a net payout after commission. A common mistake is declaring output VAT on that payout.
Worked example: one delivery order
Suppose a customer pays AED 105 including VAT and, for example, the platform transfers AED 75 after its commission and fees.
| Basis | Output VAT (AED) |
|---|
| On the customer price of 105 | 5.00 |
| On the payout of 75 | 3.57 |
| Under-declared per order | 1.43 |
On 1,000 orders a month that is about AED 1,430 of VAT under-declared every month.
Fix: in many arrangements the restaurant is the supplier of the food, so record gross sales and the commission separately. Check your platform contract and confirm the treatment with an adviser.
3. Forgetting VAT on service and delivery charges
A service charge or delivery fee added to the bill is generally part of what the customer pays for the supply, so it is normally subject to VAT as well.
Fix: make sure these charges are set up as taxable in the POS.
4. Claiming input VAT without a valid tax invoice
Input VAT can normally only be recovered when you hold a valid tax invoice from a VAT-registered supplier. Cash market purchases, unregistered suppliers and invoices without a TRN do not qualify.
Fix: check every supplier invoice for the supplier TRN, your details, the date and the VAT amount before recording it.
5. Recovering VAT on restricted expenses
Some costs carry VAT that cannot be recovered, for example certain entertainment expenses. Claiming them anyway is a frequent finding in reviews.
Fix: keep a list of restricted expense types and code them separately.
6. Posting invoices in the wrong period
Supplier invoices recorded late, or sales days split across months, push VAT into the wrong return.
Fix: close each month properly and reconcile POS VAT with your accounts before filing.
7. Weak records and late filing
VAT returns and payments are generally due within 28 days after the end of each tax period, and VAT records must be kept for at least five years. Penalties can apply for late filing, late payment and incorrect returns.
Fix: keep POS reports, tax invoices, platform statements and bank records together for each period.
Key takeaways
- VAT in an inclusive price is 5/105, not 5%.
- Delivery app sales are often VAT-able on the customer price, not the payout.
- Service and delivery charges are normally subject to VAT.
- No valid tax invoice usually means no input VAT recovery.
- File on time and keep records for at least five years.
Frequently asked questions
How do I calculate VAT from a VAT-inclusive menu price?
Multiply the price by 5 and divide by 105. For a AED 50 dish, VAT is 50 x 5 / 105 = AED 2.38 and the net price is AED 47.62. Taking 5% of the inclusive price overstates VAT.
Do I charge VAT on sales made through delivery apps?
In many arrangements the restaurant is the supplier of the food, so output VAT is due on the price the customer paid, not on the net amount the platform transfers. The platform commission is a separate cost on which the platform normally charges VAT. Check your contract and get advice on your specific model.
What should I do if I find an error in a VAT return already filed?
Depending on the size of the error, it may be corrected in a later return or may require a voluntary disclosure to the Federal Tax Authority. Act promptly, because penalties can apply and generally increase the longer an error remains uncorrected.
Not sure your VAT is right?
We review POS, purchase and platform records against your VAT returns. Start with a free profit check.
Get Your Free Profit Check
This article is general guidance for UAE F&B businesses, not tax or legal advice. VAT treatment depends on your facts and contracts; speak to a qualified tax adviser.