In short
A UAE business must register for 5% VAT once taxable supplies pass AED 375,000 in 12 months (voluntary from AED 187,500) and file returns within 28 days of each period. Corporate tax is 0% on the first AED 375,000 of taxable income and 9% above it; businesses with revenue of AED 3 million or less can elect Small Business Relief. E-invoicing becomes mandatory on 1 January 2027 for revenue of AED 50 million or more and on 1 July 2027 for all other VAT-registered businesses.
A small company in the UAE now deals with two federal taxes and, from 2027, mandatory e-invoicing. This guide explains when you must register for 5% VAT and what a compliant tax invoice contains, how the 9% corporate tax applies above AED 375,000 of taxable income, when Small Business Relief or free-zone status brings the bill to zero, and which e-invoicing phase applies to you, with both taxes worked through for a typical service company.
Open the UAE corporate tax calculator →
VAT: who must register and when
The UAE charges value added tax at a single standard rate of 5%. Registration with the Federal Tax Authority (FTA) is mandatory once taxable supplies and imports exceed AED 375,000 in the past 12 months, or are expected to in the next 30 days. Voluntary registration is open once taxable supplies or expenses pass AED 187,500, which is worth doing when your customers are VAT-registered, because it lets you recover the VAT on your own costs.
Registering late costs a flat AED 10,000 penalty, so track turnover monthly. The UAE VAT calculator adds or strips 5% from any price; the VAT penalty calculator shows what late filing or payment costs.
Returns, payment and the three rate categories
Returns are monthly or quarterly as assigned by the FTA, and both the return and the payment are due by the 28th day of the month after the tax period. Late payment attracts 2% of the unpaid tax immediately, then 4% per month from one month after the due date, up to a 300% cap.
Supplies fall into three groups. Standard-rated supplies carry 5%. Zero-rated supplies (exports outside the GCC, international transport, certain education and healthcare, the first sale of new residential property) charge 0% but allow input VAT recovery. Exempt supplies (residential rent, local passenger transport, some financial services) charge no VAT and give no recovery.
What a valid tax invoice must show
A VAT-registered business must issue a tax invoice for every standard-rated supply showing:
- the words “Tax Invoice”;
- your name, address and Tax Registration Number (TRN);
- the customer’s name and address, and their TRN if they are registered, for supplies above AED 10,000;
- a unique sequential invoice number and the date;
- a description, quantity and unit price for each line;
- the VAT rate, the VAT amount and the total payable, per line and in total.
The VAT invoice generator produces a PDF with all of these fields in your browser; sequential numbering remains your responsibility.
Corporate tax: 0% then 9%
Federal Decree-Law No. 47 of 2022 applies corporate tax to financial years starting on or after 1 June 2023. Every business and licence holder must register, including free-zone companies; a natural person registers only when business turnover exceeds AED 1 million a year. Salary, personal investment income and personally held real-estate income are outside the tax.
| Taxable income | Rate | Notes |
|---|---|---|
| First AED 375,000 | 0% | Per taxable person; a tax group shares one threshold |
| Above AED 375,000 | 9% | On the excess only |
| Revenue of AED 3,000,000 or less | 0% by election | Small Business Relief, for tax periods ending on or before 31 December 2026 |
| Qualifying Free Zone Person | 0% on qualifying income | 9% on non-qualifying income; substance and de minimis tests apply |
The return and payment are due within nine months of the end of the financial year. The tax is on taxable income (accounting profit with adjustments), not revenue, so the AED 375,000 threshold is a profit figure: on AED 900,000 of taxable income the tax is (900,000 − 375,000) × 9% = AED 47,250.
Small Business Relief
A resident business whose revenue is AED 3,000,000 or less in the current and all previous tax periods can elect to be treated as having no taxable income. The relief must be claimed in the return and, under the current rules, applies to tax periods ending on or before 31 December 2026. A business electing it still registers and files. The corporate tax calculator flags the relief when revenue is at or below the cap but does not apply it automatically.
Free-zone qualifying income
Free-zone companies are inside the regime. A Qualifying Free Zone Person (QFZP) pays 0% on qualifying income, broadly income from other free-zone entities and from abroad, and 9% on the rest. Non-qualifying revenue must stay within a de minimis limit of 5% of total revenue or AED 5 million, whichever is lower, and the company must keep adequate substance in the zone. Income from mainland UAE customers is generally non-qualifying, so a free-zone consultancy serving Dubai mainland clients should assume the standard bands unless an adviser confirms QFZP status.
Worked example: AED 1.2 million service company
A mainland consultancy invoices AED 1,200,000 (excluding VAT) in the year, with AED 300,000 of VAT-bearing costs and AED 750,000 of total expenses.
VAT. Output VAT = 1,200,000 × 5% = AED 60,000. Input VAT on AED 300,000 of costs = AED 15,000. Net VAT payable = 60,000 − 15,000 = AED 45,000 for the year, roughly AED 11,250 per quarterly return. Turnover is above AED 375,000, so registration is mandatory.
Corporate tax. Taxable income = 1,200,000 − 750,000 = AED 450,000. Tax = (450,000 − 375,000) × 9% = AED 6,750, an effective rate of 1.5% on profit. Because revenue is under AED 3 million, the company could instead elect Small Business Relief and pay nothing for a tax period ending on or before 31 December 2026.
E-invoicing. Revenue is below AED 50 million but the company is VAT-registered, so Phase 2 applies: PINT AE e-invoicing from 1 July 2027.
E-invoicing: the 2027 timeline
The UAE is moving business-to-business and business-to-government invoicing to the PINT AE format (UBL 2.1 XML) sent over the Peppol network through an accredited service provider. A PDF will not satisfy the mandate once your phase starts.
- Phase 1, 1 January 2027: businesses with annual revenue of AED 50 million or more.
- Phase 2, 1 July 2027: all other VAT-registered businesses.
A pilot opened in July 2026. Businesses not registered for VAT are outside the mandate for now. The e-invoicing mandate checker tells you which phase applies and counts the days remaining; selecting a provider and mapping your invoice data takes months, not weeks.
Setting up: what a licence costs
Published free-zone packages run from about AED 5,500 to 6,500 a year for a budget freelance permit (Sharjah, Ajman, RAKEZ) to AED 12,500 to 13,000 for a Dubai trading or consulting licence (IFZA, Meydan), plus roughly AED 4,000 to 5,000 per visa and AED 1,500 for the establishment card. The business setup cost calculator builds a first-year total.
What people get wrong
- Treating AED 375,000 as one threshold. It is two: a VAT registration test on turnover, and a corporate tax 0% band on profit.
- Assuming free zone means no tax. Free-zone companies register and file; 0% applies only to qualifying income of a QFZP that passes the substance and de minimis tests.
- Thinking Small Business Relief is automatic. It is an election made in the return, and it is time-limited.
- Removing VAT by multiplying by 0.95. A VAT-inclusive price is divided by 1.05; AED 1,050 contains AED 50 of VAT, not AED 52.50.
- Planning to email PDFs after your e-invoicing date. The mandate requires structured PINT AE data over Peppol; the PDF is only a copy.
Frequently asked questions
Can I register for VAT below AED 375,000?
Yes, voluntarily, once taxable supplies or expenses exceed AED 187,500. It is worthwhile when your customers are VAT-registered and you have input VAT to recover.
Is the AED 375,000 corporate tax threshold per company or per group?
Per taxable person. A tax group is treated as one taxable person and shares a single threshold.
Do I pay corporate tax on revenue or on profit?
On taxable income, which starts from accounting profit. Revenue matters only for the AED 3 million Small Business Relief test and the AED 1 million test for natural persons.
Does a freelancer with a free-zone permit pay corporate tax?
A natural person is within scope only when business turnover exceeds AED 1 million a year; the 0%/9% bands then apply to taxable income.
What happens if I miss the VAT payment date?
2% of the unpaid tax is charged the day after the due date, then 4% per month from one month later, capped at 300%. A late return costs AED 1,000, or AED 2,000 if repeated within 24 months.
Sources
- UAE Federal Tax Authority — VAT rates, registration thresholds and tax invoice contents (checked 28 September 2026).
- UAE Federal Tax Authority — Corporate Tax rates, Federal Decree-Law No. 47 of 2022 (checked 28 September 2026).
- UAE e-invoicing programme (PINT AE / Peppol), as summarised by e-invoicing.org and KPMG (checked 28 September 2026).
- Free zone published packages, as summarised by company-formation consultancies (checked 28 September 2026).
- UAE Federal Tax Authority — administrative penalties (Cabinet Decision 49/2021); the penalty schedule in our rules file is marked unverified, so confirm current amounts on tax.gov.ae.