# UAE corporate tax vs VAT: how the two taxes differ > UAE corporate tax vs VAT compared: rates, thresholds, filing rules, and who pays. Clear guide for UAE businesses. See the full breakdown below. Source: https://einvoicedirect.ae/uae-corporate-tax/uae-corporate-tax-vs-vat Last updated: 2026-06-05 Publisher: EInvoice Direct (Massive FZCO), UAE e-invoicing software. ## What is the difference between UAE corporate tax and VAT? UAE corporate tax vs VAT comes down to what each tax targets. Corporate tax is a direct tax on a business's net profit, charged at 9% above AED 375,000 in taxable income. VAT (Value Added Tax) is an indirect tax of 5% on the sale of most goods and services, collected from customers and paid to the Federal Tax Authority (FTA). Both taxes apply in the UAE, but they work in very different ways. One looks at what your business earns. The other looks at what your business sells. Most companies in the UAE deal with both, and the rules, deadlines, and registration thresholds are not the same. This guide compares [UAE Corporate Tax](https://einvoicedirect.ae/uae-corporate-tax) and VAT side by side. You will see who pays, what gets taxed, when returns are due, and how the two interact in day to day accounting. ## Corporate tax and VAT at a glance Here is the quick comparison most UAE finance teams need. Use it as a reference, then read the sections below for the detail. | Feature | Corporate Tax | VAT | | --- | --- | --- | | Type of tax | Direct tax on profit | Indirect tax on consumption | | Standard rate | 9% above AED 375,000 profit | 5% on most goods and services | | Zero rate band | 0% on first AED 375,000 of taxable income | 0% on specific exports, healthcare, education | | Top rate | 15% DMTT for large multinationals (EUR 750M+) | 5% standard, no higher band | | Registration threshold | All taxable persons must register | AED 375,000 mandatory, AED 187,500 voluntary | | Filing frequency | Once per financial year | Monthly or quarterly | | Filing deadline | Within 9 months of year end | Within 28 days of period end | | Legal basis | Federal Decree-Law 47 of 2022 | Federal Decree-Law 8 of 2017 | | In force since | June 1, 2023 | January 1, 2018 | ## What corporate tax taxes, and how it works Corporate tax is charged on the net profit a business earns in its financial year. Net profit means revenue minus allowable expenses. The rate is 0% on the first AED 375,000 of taxable income and 9% on anything above that. The tax was introduced by Federal Decree-Law 47 of 2022 and took effect for financial years starting on or after June 1, 2023. Read more on the [UAE Corporate Tax Law](https://einvoicedirect.ae/uae-corporate-tax/uae-corporate-tax-law) page. ### Who pays corporate tax Corporate tax applies to UAE companies, branches of foreign companies, and individuals running a business that crosses the threshold. Free zone companies can keep a 0% rate on qualifying income if they meet Qualifying Free Zone Person (QFZP) conditions. For full details see [Who Pays Corporate Tax in UAE](https://einvoicedirect.ae/uae-corporate-tax/who-pays-corporate-tax-in-uae). ### Rates and bands The headline rates are simple, but the bands matter. See [UAE Corporate Tax Rates](https://einvoicedirect.ae/uae-corporate-tax/uae-corporate-tax-rates) for a full breakdown. - 0% on taxable income up to AED 375,000. - 9% on taxable income above AED 375,000. - 15% Domestic Minimum Top-up Tax (DMTT) on large multinationals with global revenue of EUR 750 million or more, from January 2025. Small business relief is available for resident businesses with revenue up to AED 3 million, applicable through 2026. Eligible businesses are treated as having no taxable income for the period. ### Filing and payment Corporate tax returns are filed once a year, within 9 months of the end of the financial year. A company with a financial year ending December 31, 2024 must file and pay by September 30, 2025. ## What VAT taxes, and how it works VAT is charged on the sale of most goods and services in the UAE. The standard rate is 5%, set by Federal Decree-Law 8 of 2017, in force since January 1, 2018. Some supplies are zero-rated or exempt. The business charges VAT to its customer, then pays the net amount to the FTA after deducting VAT paid on its own purchases (input VAT). VAT is a tax on consumption, so the end customer carries the cost. ### Who must register for VAT VAT registration depends on the value of taxable supplies in a 12 month period. - Mandatory registration: taxable supplies above AED 375,000. - Voluntary registration: taxable supplies or expenses above AED 187,500. - Below AED 187,500: no registration required. Once registered, the business gets a Tax Registration Number (TRN) and must charge VAT on taxable sales. ### VAT rates and categories VAT has three categories of supply: - **Standard rated at 5%:** most goods and services in the UAE. - **Zero rated at 0%:** exports outside the GCC, international transport, certain healthcare, education, and the first sale of new residential property. - **Exempt:** certain financial services, residential rentals, local passenger transport, and bare land. Zero rated supplies still allow input VAT recovery. Exempt supplies do not. ### Filing and payment VAT returns are filed monthly or quarterly, depending on what the FTA assigns. Returns and payment are due within 28 days of the end of the tax period. Most small and mid-size businesses file quarterly. ## Side by side: corporate tax vs VAT in practice To see the contrast clearly, here is how each tax behaves for a typical UAE trading company. | Scenario | Corporate Tax view | VAT view | | --- | --- | --- | | Sale of AED 100,000 to a UAE customer | Adds to revenue, contributes to profit calculation | Charge AED 5,000 VAT, collect AED 105,000 | | Purchase of AED 20,000 from a UAE supplier | Deductible expense, reduces taxable profit | Pay AED 1,000 input VAT, reclaim on return | | Export of AED 50,000 to a customer in Europe | Adds to revenue | Zero rated, no VAT charged | | Salary cost of AED 30,000 | Deductible expense | Out of scope, no VAT | | Bank loan interest of AED 5,000 received | Taxable income | Exempt, no VAT | ### Worked example A Dubai based trading company has the following year: - Revenue: AED 2,000,000 - Cost of goods and operating expenses: AED 1,400,000 - Net profit: AED 600,000 Corporate tax calculation: - First AED 375,000 of profit taxed at 0% = AED 0 - Remaining AED 225,000 taxed at 9% = AED 20,250 - Total corporate tax: AED 20,250 VAT during the same year, assuming all sales are standard rated in the UAE: - Output VAT collected on AED 2,000,000 sales: AED 100,000 - Input VAT paid on AED 1,400,000 expenses (where VAT applies): up to AED 70,000 - Net VAT paid to FTA across four quarterly returns: around AED 30,000 The two taxes hit different parts of the income statement and follow different schedules. Both must be tracked separately. ## Registration, deadlines, and penalties ### Registration VAT registration is triggered by turnover. Corporate tax registration applies to every taxable person, regardless of profit level. A small consultancy with AED 200,000 profit still has to register for corporate tax, even though it owes AED 0 at 0%. The same business may not need VAT registration if its taxable supplies stay below AED 375,000. ### Deadlines | Obligation | Corporate Tax | VAT | | --- | --- | --- | | Registration | Within FTA published deadlines for each license category | Within 30 days of crossing AED 375,000 | | Return filing | 9 months after financial year end | 28 days after each tax period | | Payment | Same as return deadline | Same as return deadline | | Record keeping | 7 years | 5 years (15 for real estate) | ### Penalties Both taxes carry administrative penalties under FTA rules. Late registration, late filing, late payment, and incorrect returns can each trigger fines. The amounts differ by tax and by violation type, and the FTA publishes them in its public guides. Keeping clean records and filing on time is the simplest way to avoid them. ## How the two taxes interact Corporate tax and VAT are separate, but they touch the same data. Your sales invoices feed both: revenue for corporate tax, output VAT for VAT returns. Your purchase invoices feed both: deductible expenses for corporate tax, input VAT for VAT returns. ### VAT is not a corporate tax expense VAT collected from customers is not your income. VAT paid to suppliers is not your expense. It passes through your accounts as a balance sheet item. Only the irrecoverable portion of VAT (on exempt activities, for example) becomes a cost that affects corporate tax. ### One set of books, two returns UAE businesses need one accounting system that produces both a VAT return every quarter and a corporate tax return every year. Most accounting platforms in the UAE (Zoho Books, QuickBooks, Xero, Tally, Sage, Odoo, SAP, Oracle NetSuite, Microsoft Dynamics 365) handle both, provided the chart of accounts is set up correctly. ### E-invoicing connects both From 2026 onward, the UAE will require structured electronic invoices under the Peppol 5-corner DCTCE (Decentralized Continuous Transaction Control and Exchange) model in the PINT AE format. Phase 1 large taxpayers (AED 50 million plus revenue) must appoint an Accredited Service Provider (ASP) by October 30, 2026 and go live January 1, 2027. The same invoice data will support VAT reporting and contribute to corporate tax records. ## Special cases UAE businesses ask about ### Free zone companies Free zone companies pay 5% VAT like mainland businesses, with the exception of designated zones for goods (which have specific VAT rules). For corporate tax, a Qualifying Free Zone Person can keep 0% on qualifying income. Non-qualifying income is taxed at the standard 9% above the threshold. See [UAE Corporate Tax 9 Percent Threshold](https://einvoicedirect.ae/uae-corporate-tax/uae-corporate-tax-9-percent-threshold) for the conditions. ### Large multinationals Multinationals with consolidated global revenue of EUR 750 million or more fall under the Domestic Minimum Top-up Tax (DMTT) at 15% from January 2025. VAT still applies at 5% on their UAE supplies. The [UAE Corporate Tax 15 Percent Pillar 2](https://einvoicedirect.ae/uae-corporate-tax/uae-corporate-tax-15-percent-pillar-2) page explains the rules. ### Individuals and sole proprietors An individual running a business pays corporate tax only if business revenue exceeds AED 1 million in a calendar year. Salary, personal investment income, and real estate income (outside a business) are not subject to corporate tax. VAT depends on the AED 375,000 turnover test, regardless of business form. ## Sources - [UAE Ministry of Finance](https://mof.gov.ae) - [UAE Federal Tax Authority](https://tax.gov.ae) - [UAE MoF e-invoicing portal](https://einvoicing.mof.gov.ae) For a deeper read on the direct tax side, see [What Is UAE Corporate Tax](https://einvoicedirect.ae/uae-corporate-tax/what-is-uae-corporate-tax), and return to the [UAE Corporate Tax](https://einvoicedirect.ae/uae-corporate-tax) hub for related guides. EInvoice Direct is UAE e-invoicing software built by Massive FZCO. It produces PINT AE compliant invoices that support both your VAT returns and your corporate tax records, with an accredited ASP included at no extra charge. To see pricing for your business, [get UAE e-invoicing pricing](https://einvoicedirect.ae/for-businesses#contact). ## Frequently asked questions ### Is corporate tax the same as VAT in the UAE? No. Corporate tax is a direct tax on a company's net profit, charged at 9% above AED 375,000. VAT is an indirect tax of 5% on the sale of most goods and services, collected from customers. Corporate tax is filed once a year. VAT is filed monthly or quarterly. Most UAE businesses deal with both taxes separately. ### Do I need to register for both corporate tax and VAT? You must register for corporate tax as soon as you become a taxable person, regardless of profit. VAT registration is only required if your taxable supplies in a 12 month period exceed AED 375,000. You can register for VAT voluntarily once supplies or expenses exceed AED 187,500. Many small businesses register for corporate tax but not VAT. ### Can I deduct VAT when calculating corporate tax? VAT collected from customers and VAT paid to suppliers normally flow through balance sheet accounts and do not affect corporate tax. They are not income or expense. The exception is irrecoverable input VAT, for example on exempt activities. That portion becomes a real cost and reduces taxable profit for corporate tax purposes. ### What are the deadlines for corporate tax and VAT in the UAE? Corporate tax returns are due within 9 months of the financial year end. A company with a December 31 year end must file by September 30 the following year. VAT returns are due within 28 days of the end of each tax period, which is usually a quarter for small and mid-size businesses. Payment is due at the same time as the return. ### Are free zone companies exempt from corporate tax and VAT? Free zone companies pay 5% VAT like mainland businesses, with special rules for designated zones. For corporate tax, a Qualifying Free Zone Person (QFZP) can keep 0% on qualifying income but pays 9% on non-qualifying income above AED 375,000. There is no full exemption from either tax just because a company is in a free zone. ### What is the minimum revenue to pay corporate tax in the UAE? Corporate tax is charged at 0% on the first AED 375,000 of taxable income and 9% above that. Resident businesses with revenue up to AED 3 million can claim small business relief through 2026 and are treated as having no taxable income. Individuals running a business pay corporate tax only if business revenue exceeds AED 1 million in a calendar year. ### Which tax came first in the UAE, VAT or corporate tax? VAT came first. It was introduced on January 1, 2018 under Federal Decree-Law 8 of 2017 at a standard rate of 5%. Corporate tax followed under Federal Decree-Law 47 of 2022 and took effect for financial years starting on or after June 1, 2023. The UAE had VAT for more than five years before corporate tax began. ### Do I need separate accounting for corporate tax and VAT? You need one accounting system that produces both returns. Your sales invoices feed revenue for corporate tax and output VAT for VAT returns. Your purchase invoices feed deductible expenses and input VAT. A properly set up chart of accounts handles both. UAE e-invoicing under the Peppol PINT AE format from 2026 will link the same invoice data to both filings. --- This content is informational and is not tax, legal, or financial advice. For UAE e-invoicing pricing, see https://einvoicedirect.ae/for-businesses#contact