The UAE has two business taxes every SME owner needs to understand: VAT, charged on sales, and corporate tax, charged on profit. They have separate thresholds, separate registrations and separate returns. Missing either one can lead to penalties, so it pays to get the basics right from day one.
VAT at a glance
- Rate: 5% standard rate
- Mandatory registration: taxable supplies and imports above AED 375,000 in the past 12 months, or expected in the next 30 days
- Voluntary registration: above AED 187,500
- Once registered: charge VAT, issue tax invoices with your TRN, and file VAT returns on the schedule the FTA sets
For a deeper look at the thresholds, read do you need to register for VAT in the UAE?
Corporate tax at a glance
- Rate: 0% on taxable income up to AED 375,000, and 9% above it
- Who registers: every taxable company, including free zone companies, even if they pay 0%
- Free zones: qualifying free zone companies can pay 0% on qualifying income, but they must still register and file
- Returns: filed yearly through the FTA's EmaraTax portal
The SME compliance checklist
- Register on time for corporate tax, and for VAT once you pass the threshold
- Keep clean records: invoices, receipts, contracts and bank statements, organised by month
- Separate business and personal spending in different bank accounts
- Issue proper tax invoices once VAT-registered
- Put return deadlines in your calendar as soon as your tax periods are set
- Review relief options each year: rules for small businesses and free zones change, so check what applies to your current tax period
Common mistakes
- Assuming a free zone company doesn't need to register for corporate tax
- Tracking the VAT threshold by calendar year instead of a rolling 12 months
- Charging VAT before receiving a TRN
- Leaving bookkeeping until the return is due
Where software helps
VAT-compliant invoicing and organised records make both taxes far easier. A system that produces tax invoices and keeps sales and purchase data in one place saves hours every filing period. See our custom ERP software.
Next step: need the registrations done for you? See our VAT and corporate tax registration services.
General information, not tax advice. Rates, thresholds and reliefs change; we check current FTA guidance for every registration.