The new tax landscape in the UAE

The UAE has traditionally been known as a low-tax jurisdiction, but the landscape has changed significantly with the introduction of:

  • Value Added Tax (VAT) at 5% (effective since 2018)
  • Corporate tax on business profits (effective for financial years starting on or after 1 June 2023, with thresholds and exemptions)

For business owners, this means taxation is now part of everyday decision-making. Understanding the basics helps you avoid penalties and structure your affairs efficiently.

VAT in the UAE: key concepts

VAT is an indirect tax charged on most supplies of goods and services.

  • Standard rate: Typically 5%, with some categories zero-rated or exempt.
  • Registration: Mandatory above a certain turnover threshold; voluntary below it in some cases.
  • Input vs output VAT:
    • Output VAT: VAT you charge customers on taxable supplies
    • Input VAT: VAT you pay on purchases that may be recoverable

To manage VAT properly, you need:

  • Correct tax invoicing
  • Proper VAT coding in your accounting system
  • Timely preparation and submission of returns
  • Retention of supporting evidence and records

Corporate tax: what it means for your business

Corporate tax applies to the net profits of certain business entities and activities, subject to thresholds, exemptions, and special rules (for example, for free zones, natural resources, and qualifying income).

Key points include:

  • Scope: Generally applies to juridical persons (companies) and some natural persons engaged in business activities.
  • Taxable income: Based on accounting profit, adjusted for tax rules (e.g., non-deductible expenses, exempt income).
  • Record keeping: You must maintain proper books of account and supporting documentation.

Because the regime is still relatively new, many businesses underestimate the effort needed to prepare, especially when:

  • Financial statements are not properly maintained
  • Intercompany transactions are not documented
  • Owner-related expenses are mixed with business costs

VAT and corporate tax both rely heavily on accurate, complete accounting records. If your books are unreliable, your tax filings will be too.

A strong tax support framework includes:

  • Clear accounting policies aligned with tax rules
  • Proper classification of expenses (deductible vs non-deductible)
  • Reconciliation between accounting ledgers and tax returns
  • Timely reviews before filing deadlines

How professional tax support adds value

Beyond just completing returns, professional advisors in the UAE can:

  • Assess whether you need to register for VAT and/or corporate tax
  • Review contracts and pricing structures for tax implications
  • Help you choose appropriate legal and business structures
  • Assist with tax authority queries, audits, or reassessments
  • Identify tax efficiencies that align with the law

In a changing tax environment, having the right expertise reduces risk and frees you to focus on running your business.