The UAE's tax landscape has changed considerably in recent years. Value Added Tax has applied since 2018, a federal Corporate Tax regime applies to financial years starting on or after 1 June 2023, and a national electronic invoicing system is now being phased in. For business owners, finance teams and investors, the result is a framework that rewards good records, early planning and timely professional advice.
This article provides general information only. It is not tax advice, and every business should assess its own position with appropriately qualified and licensed professionals.
Value Added Tax (VAT): the essentials
Rate and treatment of supplies
The standard rate of VAT in the UAE is 5%. Some supplies are zero-rated – for example, certain exports of goods and services outside the GCC and international transport – meaning VAT is charged at 0% while the supply remains taxable. Other supplies, such as certain financial services, residential property (other than qualifying first supplies) and bare land, are exempt. The distinction matters because it affects whether a business can recover VAT on its own costs.
Registration thresholds
According to the Federal Tax Authority (FTA):
- Mandatory registration applies where taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to exceed it in the next 30 days.
- Voluntary registration is available where taxable supplies and imports, or taxable expenses, exceed AED 187,500.
- The mandatory threshold does not apply in the same way to foreign (non-resident) businesses making taxable supplies in the UAE.
Recent amendments
The Ministry of Finance announced amendments to the VAT law that took effect on 1 January 2026. Reported changes include simplified reverse-charge documentation and a time limit on carrying forward or reclaiming excess recoverable input tax. Businesses should confirm how these amendments affect their own processes, particularly for imports of services and refund claims.
Corporate Tax: the essentials
Rates
As set out on the UAE Government Portal and in Cabinet Decision No. 116 of 2022, Corporate Tax for a standard taxable person is charged at:
- 0% on taxable income up to AED 375,000; and
- 9% on taxable income above AED 375,000.
A separate rate framework applies to large multinational groups within the scope of the global minimum tax rules.
Registration, filing and payment
Taxable persons must register for Corporate Tax, even where no tax is ultimately payable. Corporate Tax returns are generally due, and any tax payable must be settled, within nine months of the end of the relevant tax period. For a calendar-year business, this means the return for a year ending 31 December is due by 30 September of the following year.
Small Business Relief
Resident businesses with revenue not exceeding AED 3 million in the relevant and previous tax periods may elect for Small Business Relief, under which they are treated as having no taxable income for that period. The relief is not automatic – it must be elected in the return – and it is not available to Qualifying Free Zone Persons or members of multinational enterprise groups meeting the relevant criteria. Originally available for tax periods ending on or before 31 December 2026, the relief has been reported as extended to tax periods ending on or before 31 December 2029 under Ministerial Decision No. 131 of 2026. Businesses should confirm the current position with the FTA before relying on it.
The free zone regime
Free zone companies – including those licensed in Ajman Free Zone – often ask whether they automatically pay 0% Corporate Tax. They do not. A free zone licence alone does not determine the rate.
According to the FTA, a Qualifying Free Zone Person (QFZP) must, among other conditions:
- maintain adequate substance in the free zone;
- derive Qualifying Income;
- not have elected to be subject to Corporate Tax at the standard rates;
- comply with transfer pricing requirements;
- meet the de minimis requirement, under which non-qualifying revenue must not exceed the lower of 5% of total revenue or AED 5 million; and
- prepare audited financial statements.
A QFZP pays 0% on Qualifying Income and 9% on taxable income that is not Qualifying Income; the AED 375,000 0% band does not apply to its non-qualifying income. A QFZP that fails a condition loses that status from the beginning of the relevant tax period and for the following four tax periods. Which activities count as Qualifying Activities, and which are Excluded Activities, is set out in ministerial decisions, most recently Ministerial Decision No. 229 of 2025. Because the analysis is activity- and transaction-specific, it is one of the areas where professional review is most valuable.
Electronic invoicing: the timeline
The Ministry of Finance is rolling out a national e-invoicing system, under which invoices are exchanged in a structured digital format through Accredited Service Providers (ASPs). Based on Ministerial Decision No. 244 of 2025 and the Ministry's subsequent amendments:
- A pilot programme with a taxpayer working group began on 1 July 2026.
- Businesses with revenue of AED 50 million or more must appoint an ASP by 30 October 2026 (extended from 31 July 2026) and implement e-invoicing by 1 January 2027.
- Businesses with revenue below AED 50 million must appoint an ASP by 31 March 2027 and implement by 1 July 2027.
- In-scope government entities follow a separate timeline ending on 1 October 2027.
E-invoicing is not only a technology project. It affects master data, customer and supplier records, invoice approval workflows and reconciliation. Smaller businesses that are not in the first phase still benefit from preparing early.
Good practice for every business
- Keep complete, organised records – invoices, contracts, bank statements and supporting documents – for the periods required by law.
- Separate business and personal transactions clearly.
- Reconcile VAT returns with accounting records each period.
- Track key dates for VAT returns, Corporate Tax filing and e-invoicing milestones.
- Document related-party transactions and how prices were set.
- Review the position annually, especially after changes in activities, revenue or group structure.
When to consult a registered tax agent or licensed auditor
General guidance cannot replace advice on your specific facts. You should involve appropriately qualified professionals in situations such as:
- Formal representation before the FTA – for example, during a tax audit, a reconsideration request or a voluntary disclosure. Representation of this kind is undertaken by tax agents registered with the FTA, who must also meet licensing requirements.
- Statutory audit – where audited financial statements are required (including for QFZP status), they must be prepared by an auditor registered and licensed in the UAE in accordance with Ministry of Economy requirements.
- Free zone qualification – confirming whether income is Qualifying Income and whether the de minimis test is met.
- Group structures, related parties and transfer pricing.
- Significant transactions – restructurings, acquisitions, property transactions or cross-border services.
- Penalties or disputes with the FTA.
How SOMAK can help
SOMAK Global Solutions provides accounting and bookkeeping support, audit preparation support, and tax consultancy and compliance coordination. Where formal tax-agent representation or a statutory audit is required, we coordinate with appropriately licensed professionals. If you would like to discuss your accounting and compliance requirements, our team would be pleased to hear from you.
This article is general information only and does not constitute tax, legal or accounting advice. Tax rules and their application can change; always confirm your position with the Federal Tax Authority or appropriately licensed professionals.
