How to Add VAT and Discounts Correctly on Your Invoice (UAE Guide)
Published: 1 Dec 2025
If you run a business in the UAE, creating a clear and accurate invoice is essential — especially when it comes to TRN, VAT, and discounts.
Many freelancers and small businesses make mistakes like calculating VAT incorrectly, applying discounts in the wrong order, or forgetting to show VAT breakdowns. This guide explains how to do it properly and shows an easy way to generate VAT-compliant invoices online.
Step 1: Understand How VAT Works in the UAE
The standard VAT rate in the UAE is 5%. If your business is VAT-registered, your invoice must include:
- Your TRN (Tax Registration Number)
- VAT rate (5%)
- VAT amount
- Total including VAT
If your business is NOT registered for VAT, simply set VAT to 0%.
Step 2: Apply Discounts Before Calculating VAT
The correct way to calculate VAT is:
- Calculate the subtotal
- Apply any discount
- Calculate VAT on the discounted amount
- Calculate the final total
Many businesses make the mistake of calculating VAT first and applying the discount later — this is incorrect and may cause accounting issues.
Step 3: Choose the Type of Discount
A discount can be applied in two ways:
1. Fixed Amount Discount
Example: AED 50 off the total.
2. Percentage Discount
Example: 10% discount on subtotal.
Make sure your invoice clearly shows:
- Discount type
- Discount value
- Final amount after discount
Step 4: Calculate VAT Automatically (Recommended)
Manual VAT calculation is where most errors happen. To avoid mistakes, use an online invoice builder that calculates:
- Subtotal
- Discount
- Taxable amount
- VAT total
- Grand total
ZM Softwares does all this automatically:
👉 Create VAT Invoice (Free)
Example Calculation
Let’s say your subtotal is AED 1,000 and you offer a 10% discount.
| Subtotal | AED 1,000 |
| Discount (10%) | - AED 100 |
| Taxable Amount | AED 900 |
| VAT (5%) | AED 45 |
| Total | AED 945 |
|---|
This is the correct UAE VAT flow.
Step 5: Show VAT Breakdown Clearly
A good invoice should show:
- VAT rate
- VAT amount
- Taxable base
- Total
Clients often check these numbers carefully, especially corporate accounts.
Create a Clean VAT Invoice in Seconds
Instead of manually calculating VAT, totals, and discounts, you can generate a complete UAE-friendly invoice automatically.
- Add your logo + TRN
- Enter items and quantities
- Choose discount type
- Let the system calculate totals automatically
- Print or download as PDF
👉 Create a VAT-compliant invoice now
Final Thoughts
Adding VAT and discounts correctly makes your business look professional and prevents disputes. With the right steps — or the right tool — your invoices become clean, compliant, and accurate.
Create your next VAT invoice with confidence: Generate Invoice (Free).
Related articles from our blog
Read more guides on invoices, quotations, and receipts for freelancers and small businesses in the UAE.