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

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

 ✅ 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.

📊 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).

💼 Corporate Tax Rates:

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

• 9% for taxable income above AED 375,000

💡 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.

🏢 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%)

💰 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

📘 What Is a “Qualifying Free Zone Person (QFZP)”?

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

🎯 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

🛠️ 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

📈 Let us help you stay compliant and focus on growth while we handle your tax and business setup.

📝 Final Thoughts

The UAE’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.

🔍 Ready to Get Started?

✅ Get expert help with corporate tax & VAT compliance.
📧 Email: info@dbmsbusiness.com
📞 Call: +971 505046228
🌍 Website: www.dbmsbusiness.com