Corporate Tax vs VAT in Dubai: Key Differences Explained
January 15, 2026
January 15, 2026
Topic Summary
1. Nature of Taxation
Corporate Tax is a direct tax applied on the net profits of companies operating within Dubai. In contrast, Value Added Tax (VAT) is an indirect tax levied on the consumption of goods and services at each stage of the supply chain.
2. Tax Base and Applicability
Corporate Tax applies exclusively to the taxable income of legal entities, including businesses and corporations, exceeding specified thresholds. VAT applies to most goods and services sold or consumed within the UAE, with a standard rate of 5%.
3. Calculation and Payment
Corporate Tax is calculated on the annual taxable profit after allowable deductions and allowances, typically paid annually. VAT is calculated as a percentage of the sale price and collected at the point of transaction, remitted usually on a quarterly basis.
4. Impact on Cash Flow
Corporate Tax affects a company’s net profit and may influence reinvestment or dividend distribution strategies. VAT impacts business cash flow through input and output tax mechanisms, requiring businesses to collect VAT from customers and remit it to the government while reclaiming VAT paid on purchases.
5. Compliance and Reporting Requirements
Corporate Tax compliance involves detailed accounting records, preparation of tax returns, and adherence to transfer pricing and substance requirements. VAT compliance demands registration, tax invoice issuance, submission of periodic VAT returns, and maintenance of comprehensive tax documentation.
Dubai sells a powerful promise to founders: keep more of what you earn, move faster with digital systems, and trade wider across the GCC and continents that never sleep. Even with the introduction of corporate tax and VAT, the fundamentals haven’t changed: Dubai is one of the most margin-friendly places in the world to build a business.
The biggest founder pain point in the corporate tax vs VAT debate is simple: “If I get this wrong, will I lose margins or time?”
The answer is: you won’t. Not if you understand the rules early.
Knowing how UAE corporate tax and VAT operate is one of the smartest early decisions you can make as an entrepreneur building in or relocating to Dubai. Meydan Free Zone is a Qualifying Free Zone, which means founders operating with qualifying income can retain profits at 0% corporate tax and handle VAT registration early with support through Meydan Plus (mPlus).
This guide will give you the clarity to price smarter, file on time, and build confidently without fearing a tax system that was designed to be predictable.
Understanding Corporate Tax in the UAE
Corporate tax is a direct tax on a company’s net profit.
The UAE introduced corporate tax under Federal Decree-Law No. 47 of 2022, and it applies to financial years that started on or after 1 June 2023. This tax was introduced to support national development and align the UAE with global tax standards, while still preserving generous incentives for free zone businesses that meet qualifying conditions.
Corporate tax applies to:
- UAE mainland companies
- Free zone companies on taxable income portions
- Foreign companies with a permanent establishment in the UAE
- Entrepreneurs operating a registered business entity
It does not apply to personal income earned under your own name, like salaries, freelance income, or personal investments that aren’t tied to a company.
What Are the UAE Corporate Tax Rates?
The UAE kept the rate low to protect founder margins, especially in the early years:
Say your business finishes the year with AED 820,000 profit.
- First AED 375,000 incur 0% tax = AED 0
- Remaining AED 445,000 is taxed at 9% = AED 40,050
So you keep AED 779,950 from your profit after tax and file it once a year.
Or think of it this way: your business earns enough profit to hire more, scale operations, and invest in tech, and the tax only applies to the slice above the threshold, not the whole stack of revenue. Clean, predictable, founder-friendly math.
Navigating Corporate Tax Compliance
Corporate tax in the UAE is refreshingly calm in its cadence. Here’s how it works:
- Register with the Federal Tax Authority (FTA)
- Receive your TRN (Tax Registration Number) after registration
- File corporate tax returns once a year
- Pay within 9 months of your financial year end, if tax is owed
- No quarterly or monthly filings for corporate tax
Free Zones vs Mainland Corporate Tax in Dubai
Free Zones shape how profit is taxed, especially for founders earning internationally. Mainland companies pay 9% on profit above AED 375,000, plain and predictable. In a free zone like Meydan Free Zone, a business can qualify as a Qualifying Free Zone Person (QFZP), unlocking 0% corporate tax on qualifying income, typically on revenue earned outside the UAE, from inter-free-zone transactions, or on income tied to approved licensed activities.
If a company earns taxable income, only that portion is taxed, not the full profit. For founders building cross-border or exporting digital services, this means smarter profit retention when structured early, keeping momentum high and surprises low.
At Meydan Free Zone, founders get guided support for corporate tax FTA registration, can align their licensed business activities for 0% qualifying corporate tax eligibility, and access end-to-end tax filing assistance through mPlus.
Understanding VAT in the UAE
VAT (Value Added Tax) is an indirect consumption tax charged on the sale of goods and services. Unlike corporate tax, which applies to profit, VAT applies to eligible transactions and is ultimately paid by the customer, not the company.
The UAE introduced VAT on 1 January 2018, at a standard rate of 5%.
VAT registration is triggered by annual taxable turnover, not the size of your office or the scale of your ambition.
- Mandatory registration: if your taxable sales exceed AED 375,000 a year, or if your business is expected to cross that threshold within the next 30 days
- Voluntary registration: allowed once you cross AED 187,500 a year, especially useful if you want to reclaim VAT on business expenses like software, ads, or supplier payments
Many founders register voluntarily once they start spending heavily on growth and want those credits back.
VAT Rates and Zero-Rating
The UAE’s VAT framework is federal and built to be light on margins. The standard rate is 5% on taxable supplies sold within the UAE and 0% on exports of goods and qualifying services billed outside the UAE, as long as your records and evidence support the transaction trail.
For founders selling globally, like agencies, creators, consultants, and SaaS developers, output VAT often lands at 0%, while input VAT on UAE expenses remains reclaimable. This is why founders who export services understand VAT early, as it lets them price competitively without accidentally absorbing the tax.
Navigating VAT Compliance
Once you’re VAT registered, the system is steady, not stressful. Founders who stay organised treat it like part of operations, not an interruption.
- Charge 5% VAT only on taxable UAE sales
- File returns quarterly or monthly on time, based on FTA classification
- Keep records for 5 years
- Offset input VAT (what you paid) against output VAT (what you collected)
VAT in Free Zones
VAT does not automatically become 0% just because you’re in a free zone.
However:
- Exports of goods and qualifying services outside the UAE are 0% VAT
- Taxable supplies sold within the UAE are 5% VAT if the business is VAT-registered
- VAT-registered businesses can reclaim input VAT paid on eligible UAE expenses
Meydan Free Zone operates in a non-designated VAT zone, which means:
- Taxable UAE domestic invoices incur 5% VAT (collected from customers)
- International or export-led revenue can still be invoiced at 0% VAT on what you collected, if records support it
At Meydan Free Zone, founders can access VAT registration and return filing support through mPlus, so you can lean on expert assistance instead of handling the calculations, forms, or deadlines alone.
Corporate Tax vs VAT in Dubai: A Clear Comparison
Corporate tax impacts what you retain, VAT impacts what you remit, and Dubai keeps both lanes low, clear, and scheduled. Here’s a breakdown:
How Meydan Free Zone Supports Founders in Dubai’s Tax Environment
Through Meydan Plus – mAccounting, Meydan Free Zone provides accounting and tax support tailored for small and scaling businesses. These services focus on relevance, covering:
- Ongoing bookkeeping and bookkeeping support
- VAT registration and VAT return filing support, when applicable
- Corporate tax registration readiness and annual reporting support
- Financial statements aligned with UAE compliance expectations
- Guaranteed IBAN through partner UAE banks
Founders can also plan early using tools like the Meydan Free Zone business setup cost calculator, which helps you understand what renews, when, and how costs evolve before any decisions are made.
Final Thoughts
Founders come to Dubai for one thing: a system that lets them build without friction eating profit or time. Corporate tax and VAT are part of the environment now, but they’re not a reinvention of the game, just new lanes to understand before you accelerate. Once you know the difference, you stop planning for imaginary documentation storms and start structuring for real growth.
Meydan Free Zone becomes relevant at that exact moment founders care about most: early clarity, fast incorporation, smart business activity alignment, 0% tax on qualifying free zone income, and access to corporate tax and VAT registration support through mPlus. It’s digital, efficient, and built for founders who want setup to feel like momentum, not misdirection.
Keep building. Keep scaling. Start smart. Launch today with Meydan Free Zone.
FAQs
1. What is the corporate tax registration threshold in the UAE?
All companies with a UAE business license must register for corporate tax with the Federal Tax Authority. The law applies to profit earned, and the tax structure gives founders a 0% rate up to AED 375,000 profit, with a 9% rate on the excess. Businesses recognised as a Qualifying Free Zone Person, such as companies in Meydan Free Zone, can get 0% corporate tax on qualifying income, while only the mainland-sourced taxable profit slice becomes subject to the 9% rate beyond AED 375,000 profit.
2. At what revenue level must a business register for VAT in the UAE?
VAT registration is mandatory once annual taxable turnover exceeds AED 375,000. If your business is expected to cross that threshold in the next 30 days, you must register. Founders can also register voluntarily once turnover passes AED 187,500.
3. How often do VAT returns need to be filed?
VAT returns must be filed quarterly or monthly depending on the classification assigned by the Federal Tax Authority based on your turnover and business profile.
4. How does Meydan Free Zone support founders with corporate tax?
Meydan Free Zone helps founders align their business activities with eligible income streams to be eligible for 0% corporate tax on qualifying income and provides guided support for CT registration with the FTA through Meydan Plus, so early compliance feels structured and clear.
5. How can Meydan Free Zone help with VAT registration and filing?
Meydan Free Zone provides VAT registration and return-filing support through mPlus, helping founders prepare, review, and submit documentation to remain compliant with UAE VAT requirements.
