VAT at five per cent on UAE construction
Since 2018 construction in the UAE has carried VAT at five per cent. It is a small rate, but it sits on large certified sums, and the place it goes wrong is the line between net and gross.
QScope Team · 14 July 2026 · 5 min read
Construction services in the United Arab Emirates are standard-rated for VAT at five per cent, administered by the Federal Tax Authority since the tax was introduced in 2018. The rate is low by international standards, but it applies to certified sums that run into millions of dirhams, so the arithmetic is worth getting exactly right. Almost every error is the same one: the net and the gross being allowed to blur.
VAT sits on top of the certified sum
The Interim Payment Certificate values the work net of tax. VAT is then added as a separate five per cent line on the amount certified for that period. It is not embedded in the rates, and it is not deducted like retention. The certificate answers what the work is worth; the tax line answers what the authority is owed on it. Keeping the two apart is the whole discipline.
The tax point and the certificate
For construction, the date of supply rules and the certificate cycle need to line up. Where payment is certified periodically, the tax point tends to follow the earlier of the certificate, the payment or the tax invoice, so the invoice should be raised against the certified sum for the same period rather than on a clock of its own. When the invoice runs ahead of or behind the certificate, the VAT return and the payment record stop reconciling, and the reconciliation is what an audit asks for first.
Where it goes wrong on site
- VAT calculated on the gross. Applying five per cent after retention and advance payment recovery, rather than on the net value of work, produces a tax figure that does not match the invoice.
- Retention taken on the VAT-inclusive figure. Retention is a deduction from the net valuation, not from the tax. Deduct it from the gross and the retained balance is overstated for the life of the job.
- One number for the whole certificate. A certificate that shows a single total, with the VAT folded in, cannot be reconciled to a return. The net, the tax and the gross each need their own line.
None of this is difficult. It only becomes difficult when a certificate carries one blended figure and the surveyor has to unpick net from tax months later, for an account or an audit, from a record that never separated them.
QScope certifies the net valuation, adds UAE VAT at five per cent as a separate line, and keeps the tax point and the certified sum aligned so the payment certificate and the tax invoice never disagree.