Quick answer:
Businesses in every emirate pay the same two federal taxes: 5% VAT on most goods and services, and 9% corporate tax on taxable profit above AED 375,000. The Federal Tax Authority (FTA) runs both, and returns are filed through its EmaraTax portal. The rules are identical in Dubai, Abu Dhabi, Sharjah and the other emirates, so one compliance system covers a business wherever it trades.
The rules also changed in 2026. A revised penalty framework took effect on 14 April 2026, self-invoicing under the reverse charge was removed from January 2026, and e-invoicing is being phased in. This guide explains what each rule means in practice and where businesses most often slip.
Learn how UAE VAT (5%) and corporate tax (9%) work in 2026: registration thresholds, filing deadlines, new penalties, refunds and appeals. Updated October 2026.
Key takeaways
• VAT rate: 5% standard rate; 0% for zero-rated supplies such as exports; exempt supplies carry no VAT and no input tax recovery.
• Registration: mandatory above AED 375,000 of taxable supplies and imports; voluntary from AED 187,500.
• Filing: VAT returns and payment are due within 28 days of the end of each tax period.
• Corporate tax: 9% on taxable income above AED 375,000, with a 0% rate for Qualifying Free Zone Persons on qualifying income.
• Penalties: late VAT registration is a fixed AED 10,000 under the rules effective 14 April 2026.
• Official source: the FTA VAT registration page is the authority on thresholds.
How UAE VAT works
UAE VAT is a consumption tax charged at each stage of the supply chain, in force since 1 January 2018. VAT-registered businesses charge it on sales (output tax), deduct what they paid on purchases (input tax), and send the difference to the FTA. The final consumer bears the cost, and the business acts as the collector.
The rate depends on the type of supply, and the type decides whether you can recover input VAT:
Supply type | Rate | Typical examples | Input VAT recoverable? |
Standard-rated | 5% | Most goods and services, including digital services | Yes |
Zero-rated | 0% | Qualifying exports, international transport | Yes |
Exempt | No VAT | Residential property, bare land, local passenger transport, certain financial services | No |
The zero-rated versus exempt distinction is a common source of errors. Zero-rated sales count toward your registration threshold and let you reclaim related input VAT. Exempt sales do neither.
For tax-inclusive prices, the VAT portion is the total multiplied by 5/105. For example, a AED 1,050 invoice contains AED 50 of VAT.
Official resource: The Federal Tax Authority publishes the definitive rules, guides, and e-learning on its VAT topics page. Check it before relying on any summary, including this one.
Who must register for VAT in the UAE
The FTA sets two thresholds for VAT registration in the UAE:
• Mandatory: your taxable supplies and imports exceeded AED 375,000 over the previous 12 months, or you expect them to exceed it in the next 30 days.
• Voluntary: you do not meet the mandatory test, but your taxable supplies, imports or taxable expenses exceed AED 187,500 over the previous 12 months, or will in the next 30 days.
The AED 375,000 threshold does not apply to foreign businesses making taxable supplies in the UAE where no one else is liable to account for the VAT. They register regardless of value.
Free zone companies are not automatically exempt. Only areas the Cabinet lists as designated zones get special treatment, and generally only for goods. Services supplied in or from a free zone usually remain taxable, so check each transaction.
Registration is done online through EmaraTax and ends with a Tax Registration Number (TRN). Registering late carries a fixed AED 10,000 penalty, covered below. If you are unsure whether you have crossed a threshold, a team of VAT consultants in Dubai can review your turnover before the deadline passes.
VAT returns, payments and record keeping
Once registered, you file a VAT return (form VAT201) through EmaraTax and pay any balance within 28 days of the end of each tax period. The FTA assigns the period, usually quarterly, and large-turnover businesses are typically placed on monthly filing. The FTA's own announcements page currently lists 28 October 2026 as the deadline for the latest VAT return round, so check your assigned period now.
Getting this right every period is the job of professional VAT return filing services in Dubai, especially for businesses with mixed taxable and exempt sales.
Good records protect your input VAT claims:
• Tax invoices: show the supplier's TRN, a unique number, the date, a description, the VAT amount, and the customer's details where required.
• Retention: keep VAT records for five years, and 15 years for real estate records.
• Supplier checks: confirm that suppliers are VAT-registered before claiming input tax on their invoices.
• E-invoicing: a voluntary phase began in July 2026, and the mandatory phase starts in 2027, rolling out by business size. Accounting systems should be ready before your phase begins.
VAT refunds and the 2026 rule changes
If your input VAT exceeds your output VAT, the excess can be carried forward or claimed as a refund. Two changes from 1 January 2026 matter here. Excess recoverable VAT now has a five-year limit: you must offset it or file a refund claim within five years of the end of the relevant tax period. The FTA can also deny input VAT where a transaction is part of a chain linked to tax evasion and you knew, or should have known, about it. Self-invoicing under the reverse charge mechanism was removed in the same reforms.
Old credit balances can expire, so exporters and fast-growing businesses should review theirs. Structured VAT refund services in Dubai help prepare claims with the supporting documents the FTA expects.
VAT penalties in 2026
Cabinet Decision No. 129 of 2025 took effect on 14 April 2026 and, according to the FTA, reduced many administrative penalties or changed how they are calculated. The amounts below come from published summaries of the decision; confirm them against the FTA's legislation page before acting.
Violation | Penalty |
Late VAT registration | AED 10,000 fixed |
Late VAT return, first time | AED 1,000 |
Late VAT return, repeat within 24 months | AED 2,000 |
Late payment | 14% a year on the unpaid tax, charged monthly |
Incorrect tax invoice | AED 2,500 per case |
Failure to keep required records | AED 10,000 first time, AED 20,000 repeat |
Understated tax found by the FTA | 15% of the shortfall plus 1% a month |
Self-correcting is cheaper. A voluntary disclosure filed before the FTA starts an audit removes the fixed 15% component, leaving the monthly charge. Waiting costs more with every month that passes.
If you receive a penalty you believe is wrong or excessive, you can ask the FTA to review it. VAT penalties reconsideration services in Dubai prepare that request with supporting evidence.
VAT assessments, audits and appeals
The FTA can audit VAT returns going back five years, and longer in fraud cases. After an audit, it issues an assessment. Disputes follow a strict sequence: a formal objection to the FTA, then an appeal to the Tax Disputes Resolution Committee, then the Federal Court. The objection window is short, 20 business days from the notice, and missing it can forfeit your right to dispute the amount.
Keep your audit file ready: invoices, contracts, bank records, and return workings. If an assessment arrives, VAT assessment and appeals services in Dubai can help you respond within the deadline.
Most compliance failures start inside the finance team, so professional VAT training in the UAE for accountants and invoicing staff is often the cheapest fix.
UAE corporate tax: the other half of compliance
VAT taxes spending, while corporate tax taxes profit. Many businesses confuse the two, and registering for one does not satisfy the other.
• Rate: 9% on taxable income above AED 375,000. Income within this threshold is subject to a 0% tax rate.
• Who is covered: companies and businesses in all seven emirates, onshore and in free zones. Free zone companies that meet the conditions of a Qualifying Free Zone Person pay 0% on qualifying income only.
• Small Business Relief: resident businesses with revenue of AED 3,000,000 or less in the current and all previous tax periods can elect to be treated as having no taxable income for that period. The FTA notes the relief is not available to Qualifying Free Zone Persons or to members of very large multinational groups.
• Filing: returns and payment are generally due nine months after the end of the financial year. For a year ended 31 December 2025, the FTA set 30 September 2026 as the deadline.
Federal taxes apply across every emirate. Businesses extracting natural resources may also face separate emirate-level taxes.
Transfer pricing for related-party deals
If your business trades with related parties, such as a parent company, a sister company or an owner, those transactions must follow the arm's length principle: priced as independent parties would price them. Small Business Relief removes the documentation requirement but not the arm's length rule. For groups with cross-border dealings, transfer pricing services in Dubai help with benchmarking, documentation and defensible policies. Large multinational groups should also follow the FTA's guidance on top-up tax.
A practical compliance checklist
• Check your trailing 12-month taxable turnover against AED 375,000 and AED 187,500.
• Confirm your assigned VAT tax period and diarise the 28-day deadline.
• Review old VAT credit balances for the five-year limit.
• Verify supplier TRNs before claiming input tax.
• Confirm that your invoices meet current tax invoice rules and prepare for e-invoicing.
• Register for corporate tax and file on time, even if the tax due is nil.
• Document related-party transactions at arm's length.
• Correct errors through voluntary disclosure before an FTA audit begins.
Frequently Asked Questions
Final thoughts
UAE tax compliance is manageable when it is systematic: register on time, file inside the 28-day window, keep clean invoices, and correct mistakes early. With penalties, refund limits and e-invoicing all changing in 2026, an annual review of your VAT and corporate tax position is worth the time.
Pure Docs Business Consultant Services offers VAT and TAX consultancy services.
This article is general information, not legal or tax advice. Confirm figures with the FTA or a qualified adviser before acting.
