Output VAT becomes payable by reference to the tax invoice, not the customer's payment. Where you grant credit terms, you settle the tax before the cash arrives. This calculator estimates the gap and the working capital it absorbs.
The date of supply is the earliest of delivery or performance, receipt of payment, or issue of the tax invoice. The return and the payment are both due within 28 days of the end of the tax period.
Your figures
Input
Value
Monthly revenue subject to 5% VAT (AED)
Average customer payment terms (days from invoice)
Filing frequency
Cost of funds, annual % (for the financing estimate)
Output VAT charged per month
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gross, before input recovery
Average days you fund VAT
—
before the customer pays
Working capital tied up
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on average, at any time
How this is calculated
This is gross output VAT exposure before input recovery. The amount actually funded is reduced by recoverable input VAT, credit notes and other adjustments, and is affected by zero-rated or exempt revenue, advances and the concentration of invoices within the period. Treat the result as an upper bound and substitute your expected net VAT payable for a closer estimate. Further assumptions: invoices are issued evenly through the period, so the average invoice sits half a period before the period end, to which the 28-day settlement window is added; customer payment arrives on the stated terms.
What can be done about it
Use proforma invoices for advance requests: a proforma is not a tax invoice and does not, by itself, trigger the date of supply. It defers nothing if delivery, performance, payment or another statutory event has already occurred — in those cases the tax point has already passed and the proforma changes nothing
Align milestone invoicing with actual performance rather than issuing early in a period
Where invoices are genuinely uncollectible, bad debt relief allows the output VAT to be recovered, subject to conditions including that six months have passed, the debt is written off and the customer has been notified
Reflect the VAT timing in credit terms and in the cash forecast, particularly for large invoices issued near a period end
Planning cash flow around this?
Under electronic invoicing the issue date is registered with the authority as the invoice is issued, so the timing is no longer a matter of internal practice. If you would like this modelled on your actual invoice profile, send us your figures.
This material is provided for general information only and does not constitute tax, legal or accounting advice. Requirements and thresholds change; positions depend on individual circumstances. Consult a qualified adviser before acting. Position as at July 2026, based on Federal Decree-Law No. 8 of 2017 on Value Added Tax and its Executive Regulations.