Corporate Tax vs VAT in Dubai | UAE Mainland & Free Zone Tax Guide 2025

Blog Image

Corporate Tax vs VAT in Dubai | UAE Mainland & Free Zone Tax Guide 2025

ย โœ… Introduction: Navigating the UAE Tax Landscape

Are you starting or running a business in Dubai and wondering how corporate tax differs from VAT? Understanding the UAE tax system is essential whether you operate in the Dubai mainland or a free zone.

With the UAE introducing corporate tax in 2023 and having enforced VAT since 2018, staying compliant and optimizing tax benefits is more important than ever.

At DBMS Business Management, we help entrepreneurs and companies thrive by simplifying complex tax laws in the UAE business environment.

๐Ÿ“Š What Is Corporate Tax in the UAE?

Corporate tax in the UAE is a federal tax levied on business profits. As of June 2023, all UAE-based companies are required to comply with the new corporate tax regime introduced by the Federal Tax Authority (FTA).

๐Ÿ’ผ Corporate Tax Rates:

  • 0% for taxable income up to AED 375,000

  • 9% for taxable income above AED 375,000

๐Ÿ’ก What Is VAT in Dubai?

VAT (Value Added Tax) is a consumption tax charged on most goods and services in the UAE. It applies at a flat rate of 5%, affecting both mainland and free zone companies.

๐Ÿข Corporate Tax: Mainland vs Free Zone

Criteria Dubai Mainland Dubai Free Zone (Qualifying)

Corporate Tax Rate 9% above AED 375,000 0% on qualifying income; 9% otherwise Qualifying Activities Not applicable Required for 0% tax rate Mainland Transactions Fully taxable Subject to tax unless exempt Corporate Tax Filing Mandatory Mandatory (even if at 0%)

ย 

๐Ÿ’ฐ VAT: Mainland vs Free Zone

Criteria Mainland Designated Free Zone

VAT Applicability 5% on most goods and services VAT exempt in specific transactions VAT Registration Mandatory if revenue AED 375,000 Same threshold applies Intra-zone Supply VAT applies Exempt if within Designated Zones

๐Ÿ“˜ What Is a โ€œQualifying Free Zone Person (QFZP)โ€?

A QFZP is a free zone company that meets all the criteria to be taxed at 0% corporate tax. To maintain this status, the company must:

  • Conduct qualifying activities (e.g., manufacturing, trading, R&D)

  • Have adequate substance in the Free Zone

  • Not elect to be subject to standard tax

  • Comply with transfer pricing rules

๐ŸŽฏ Why Businesses Must Understand UAE Tax Laws

With increasing compliance requirements from the Federal Tax Authority, businesses need to:

  • Understand the corporate tax structure

  • Determine if their Free Zone qualifies for 0% tax

  • Register for VAT and file returns on time

  • Avoid costly penalties due to non-compliance

ย 

๐Ÿ› ๏ธ How DBMS Business Management Can Help

At DBMS, we assist businesses with:

  • Corporate Tax Registration

  • VAT Registration & Filing

  • FTA Compliance

  • Business Setup in Dubai Mainland & Free Zones

๐Ÿ“ˆ Let us help you stay compliant and focus on growth while we handle your tax and business setup.

ย 

๐Ÿ“ Final Thoughts

The UAEโ€™s corporate tax and VAT systems are designed to align with global standards while offering competitive advantages, especially for Free Zone companies.

Understanding the difference between Corporate Tax and VAT is crucial for making strategic business decisions in Dubai.

ย 

๐Ÿ” Ready to Get Started?

โœ… Get expert help with corporate tax & VAT compliance.
๐Ÿ“ง Email: info@dbmsbusiness.com
๐Ÿ“ž Call: +971 505046228
๐ŸŒ Website: www.dbmsbusiness.com

ย 

Previous Post No Next Post

Comments:

  • Balancing automation and human touch is essential for a successful customer experience.

    Henry Joseph 22 Feb 2025
  • Addressing the challenges businesses face in implementing proactive customer experience strategies would provide a more balanced perspective.

    Michael James 22 Feb 2025

Leave a comments:

Letโ€™s work together

Each demo built with Teba will look different. You can customize anything appearance of your website with only a few clicks