VAT vs Corporate Tax in UAE: Key Differences Every Business Should Know

As the UAE aligns with global tax systems, understanding the difference between VAT and Corporate Tax is vital for SMEs, startups, consultants, and Free Zone companies.

VAT is a 5% indirect tax on the consumption of goods and services. Businesses must register if their annual turnover exceeds AED 375,000. Returns are filed quarterly, and proper invoices and input VAT records are mandatory.

Corporate Tax (CT), introduced in June 2023, is a direct tax on net profits. Companies pay 0% on earnings up to AED 375,000, and 9% beyond that. Filing is annual, and businesses are required to maintain audited financial statements on an annual basis.

Free Zone companies are not exempt from VAT. However, they may qualify for 0% CT if they only operate within Free Zones and meet Qualifying Free Zone Person conditions.

For example, a Free Zone company earning AED 600,000 revenue and AED 200,000 profit must register for VAT but is exempt from CT.

Both taxes require separate compliance, and failure to comply can result in severe penalties.

Learn more in our complete guide: VAT vs Corporate Tax in UAE – Key Differences Every Business Should Know.