Frequently Asked Questions
Explore answers to commonly asked questions about our corporate tax, VAT, audit, and accounting services in the UAE and India.
What is VAT?
VAT (Value Added Tax) is a consumption tax levied on the sale of goods and services. It is collected at each stage of the supply chain and ultimately borne by the end consumer.
When was VAT introduced in the UAE?
VAT was implemented in the UAE on January 1, 2018 at a standard rate of 5%.
Who needs to register for VAT in the UAE?
Mandatory Annual turnover > AED 375,000
Voluntary Annual turnover > AED 187,500
Both UAE-based businesses and foreign businesses making taxable supplies in the UAE may need to register.
What is a Taxable Supply?
Taxable supplies are goods and services subject to VAT at either the standard rate (5%) or zero rate (0%), excluding exempt supplies.
What is Input Tax and Output Tax?
Input Tax: VAT paid by a business on purchases.
Output Tax: VAT collected by a business on sales.
Net VAT = Output Tax – Input Tax
How is VAT filed in the UAE?
VAT returns (Form VAT201) must be filed online via the FTA e-Services portal, typically quarterly or monthly depending on the FTA’s assignment.
What is the deadline for VAT return filing and payment?
The VAT return and payment must be submitted by the 28th of the month following the end of the tax period.
What happens if I don’t file or pay VAT on time?
Penalties include:
AED 1,000 for the first-time late filing.
AED 2,000 for repeated delays within 24 months.
Additional percentage-based penalties and interest on late payments.
Can I get a refund of VAT?
Yes. If your input VAT exceeds output VAT, you may request a refund from the FTA or carry it forward to future periods.
What records must be maintained for VAT compliance?
Businesses must retain:
- Sales and purchase invoices
- VAT returns and payment proofs
- Import/export records
- Tax credit notes and debit notes
Records must be kept for at least 5 years (or 15 years for real estate).
How can I deregister for VAT?
You may apply for VAT deregistration via the FTA portal if:
- Your taxable turnover is below AED 187,500 for 12 consecutive months.
- You no longer make taxable supplies.
Is VAT applicable to e-commerce and online sales?
Yes. E-commerce businesses supplying goods or services in the UAE must register and charge VAT if their taxable turnover exceeds the mandatory threshold.
Can non-residents register for VAT in the UAE?
Yes. Non-residents making taxable supplies in the UAE must register unless another UAE-based person is responsible for accounting the VAT (reverse charge).
Where can I get help or support regarding VAT?
You can contact the Federal Tax Authority (FTA) or consult with a registered Tax Agent for personalized support.
Which is the best VAT consultant in UAE?
Accruon Consultant is widely recognized as one of the best VAT consultants in UAE, offering expert guidance on VAT registration, return filing, compliance, and audits. The tailored approach ensures businesses stay fully compliant with UAE tax laws while optimizing their VAT processes.
What is Corporate Tax in the UAE?
Corporate tax is a direct tax imposed on the net profits of businesses operating within the UAE. The move aligns the UAE with international tax standards and aims to support the country’s strategic objectives.
When did Corporate Tax come into effect?
Corporate tax in the UAE came into effect for financial years starting on or after June 1, 2023.
What is the corporate tax rate in the UAE?
#0% on taxable income up to AED 375,000 (to support small businesses and startups).
#9% on taxable income above AED 375,000.
Who is subject to UAE corporate tax?
Corporate tax applies to:
#Companies incorporated or effectively managed in the UAE.
#Branches of foreign companies operating in the UAE.
#Certain freelancers and sole proprietorships, if their business income exceeds AED 375,000 annually.
Are Free Zone companies subject to corporate tax?
Yes, but with certain benefits:
#Qualifying Free Zone Persons (QFZPs) can benefit from 0% tax on qualifying income, provided they meet conditions such as maintaining adequate substance and complying with transfer pricing rules.
#Non-qualifying income of Free Zone companies will be taxed at 9%.
Are personal income or salaries taxed under this regime?
No. Individuals’ salaries, wages, and other employment income are not subject to corporate tax, whether earned from the private sector or government. Similarly, income from real estate investments by individuals (in their personal capacity) is not taxed.
Do businesses need to register for corporate tax in the UAE?
Yes. All taxable persons including Free Zone companies must register with the Federal Tax Authority (FTA), even if their income is below the AED 375,000 threshold.
What about foreign businesses,are they subject to UAE corporate tax?
Foreign companies are subject to UAE corporate tax only on income derived from a permanent establishment or source within the UAE. Passive income like dividends, interest, and capital gains from UAE sources may be exempt, depending on the circumstances.
Is there any relief for small businesses?
Yes! The UAE corporate tax law offers:
# A small business relief provision (subject to conditions), allowing eligible businesses with revenue below a specified threshold to be treated as having no taxable income.
# A 0% tax rate on the first AED 375,000 of taxable profits.
What are the penalties for non-compliance?
The FTA may impose administrative penalties for:
a)Failure to register for corporate tax
b)Non-filing or late filing of tax returns
c)Inaccurate tax returns or failure to maintain proper records
d)Penalties will be set in line with existing tax procedures in the UAE (similar to VAT penalties)
How is corporate tax calculated in UAE?
Corporate tax UAE is calculated at 9% of the net profit shown in the company’s financial statements after deducting all applicable deductions and excluding the exempted income
Is UAE tax free for business?
The UAE is no longer fully tax-free for businesses. Since June 1, 2023, a corporate tax of 9% applies on taxable profits above AED 375,000, while profits below that are taxed at 0%. However, free zone businesses may still enjoy 0% tax on qualifying income if they meet certain conditions.
What supporting documents are required for corporate tax filing in the UAE?
For corporate tax filing in the UAE, businesses are generally required to maintain and submit the following supporting documents:
- Audited financial statements (depending on business size and regulatory requirements)
- Corporate tax return form (as prescribed by the FTA)
- Transfer pricing documentation, if applicable (such as master file, local file, and disclosure forms)
- Supporting schedules for deductions, exemptions, and tax adjustments
- Records of intra-group transactions
- Any elections or declarations made under the Corporate Tax Law
How does corporate tax apply to natural persons conducting business in the UAE?
Corporate tax applies to natural persons (individuals) who are engaged in business activities in the UAE if their annual turnover exceeds AED 1 million. The same corporate tax rates apply: 0% on taxable income up to AED 375,000 and 9% on taxable income above AED 375,000. Income from employment, personal investments, and real estate (not related to business activities) is not subject to corporate tax.