Shuraa Tax Blog

Author: Ritish Sharma

  • Warehouse Keeper Registration and Renewal in the UAE

    Warehouse Keeper Registration and Renewal in the UAE

    Warehouses are the backbone of the UAE’s trade and logistics network. From storing imported goods to managing excise products and supporting supply chains across the region, warehouse keepers play a much bigger role than just holding stock. Because of this, the UAE has put specific rules in place to regulate who can operate a warehouse and how these facilities are managed. This is where warehouse keeper registration and renewal in the UAE becomes important.

    Warehouse keeper registration ensures that warehouses handling goods, especially regulated or taxable items, are properly recorded with the relevant authorities. It helps the government track the movement and storage of goods, maintain tax transparency, and prevent misuse of warehouses within the supply chain.

    If your registration lapses, your warehouse could lose its special tax status overnight. That means all the goods inside could suddenly be hit with huge tax bills, and your operations could grind to a halt.

    Here we’ll show you exactly what you need to do to stay compliant, avoid heavy fines, and keep your warehouse running without a hitch.

    What Is a Warehouse Keeper?

    A Warehouse Keeper is a person or company authorised by the FTA to supervise and manage a Designated Zone. Think of a Designated Zone as a tax-free bubble. It is a specific area (like certain parts of JAFZA or KIZAD) where goods like tobacco, energy drinks, or electronic smoking devices can be stored without paying excise tax immediately. As the Warehouse Keeper, you are the guardian of that bubble. The government trusts you to make sure no goods enter or leave without the proper paperwork and tax being handled.

    Who Needs to Register as a Warehouse Keeper?

    Not every business that has a warehouse needs this registration. It is specifically for those dealing with Excise Goods. Common examples include:

    1. Third-Party Logistics (3PL) Providers: Companies that store and manage inventory for other brands.
    2. Large Manufacturers: Businesses that produce excise goods inside a Free Zone and store them on-site.
    3. Distributors & Importers: Companies that bring high volumes of excise goods into the UAE to be re-exported or sold locally later.

    Warehouse Owner vs Warehouse Keeper: What’s the Difference?

    A warehouse owner is the person or company that owns or leases the warehouse property. A warehouse keeper, on the other hand, is the party responsible for managing the stored goods and ensuring compliance with UAE tax and customs rules. In some cases, both roles are handled by the same business.

    However, in shared or third-party warehouses, the owner and the warehouse keeper may be different entities, and the warehouse keeper is the one required to complete registration and renewal.

    Why Warehouse Keeper Registration Is Mandatory in the UAE?

    Registering as a warehouse keeper is essential for businesses storing regulated or taxable goods in the UAE.

    1. To Monitor Stored Goods Properly

    Warehouses in the UAE often store imported, high-value, or regulated goods. Registering warehouse keepers allows authorities to know where goods are stored and how they are handled. This helps maintain transparency across the supply chain and reduces the risk of misuse or unauthorised movement of goods.

    2. To Ensure Tax and Customs Compliance

    Many warehouses handle excise or taxable goods such as tobacco, soft drinks, or energy drinks. Warehouse keeper registration helps the Federal Tax Authority (FTA) and customs authorities monitor these goods and ensure that taxes are correctly reported and paid. Without registration, it becomes difficult to control tax compliance.

    3. To Assign Clear Responsibility

    Registration clearly identifies who is responsible for the goods stored inside a warehouse. Whether it is a logistics company, distributor, or manufacturer, having a registered warehouse keeper ensures there is accountability for storage, handling, and release of goods.

    4. To Avoid Penalties and Business Disruptions

    Operating a warehouse without proper registration or with an expired registration can lead to fines, delays, or even suspension of warehouse operations. Mandatory registration helps businesses stay compliant, avoid legal issues, and continue their operations smoothly.

    Authorities Involved in Warehouse Keeper Registration in the UAE

    Warehouse keeper registration in the UAE involves coordination with more than one government authority, depending on the type of goods stored and the nature of the warehouse.

    1. Federal Tax Authority (FTA)

    The FTA is the primary authority for Warehouse Keeper registration. They review your application, issue your registration certificate, and manage the EmaraTax portal where you’ll file renewals. Their main goal is tax collection and ensuring that excise goods (like tobacco or energy drinks) are tracked perfectly so no tax revenue is lost.

    2. UAE Customs Authorities

    While the FTA handles the taxes, Customs handles the physical movement of goods. Depending on where your warehouse is located, you will deal with bodies like Dubai Customs, Abu Dhabi Customs, or Sharjah Customs. They monitor the entry and exit of goods from your warehouse.

    3. Free Zone Authorities

    Since most Designated Zones are located within Free Zones (like JAFZA, DAFZA, or KIZAD), the specific Free Zone Authority (FZA) is a key stakeholder. They provide the initial trade license and the lease agreement for your warehouse space.

    4. Security and Safety Departments

    To get FTA approval, your warehouse must be a fortress for excise goods. This involves local security and safety regulators (such as Civil Defence). They inspect your CCTV systems, fire safety measures, and physical fencing. The FTA will often ask for fitness certificates or logs from these departments as part of your application.

    Warehouse Keeper Registration Process in the UAE

    Registering as a Warehouse Keeper in the UAE is a structured process handled entirely online through the Federal Tax Authority (FTA) portal, known as EmaraTax. Here is a simplified, step-by-step guide to how the process works.

    1. Set Up Your EmaraTax Account

    Before you can apply to be a Warehouse Keeper, you need a digital profile. Go to the EmaraTax portal and create an account using your email or UAE PASS.

    Create a Taxable Person Profile: If your company isn’t already registered with the FTA (for VAT or Excise), you’ll need to create a “Taxable Person” profile by entering your company’s legal details.

    2. Submit the Warehouse Keeper Application

    Once logged in, look for the Excise Tax section on your dashboard.

    • Start Service: Click on “Warehouse Keeper Registration.”
    • Fill in the Details: You will need to provide information about your business activities, the types of excise goods you handle (e.g., tobacco, energy drinks), and your estimated stock levels.
    • Link a Designated Zone: By law, a Warehouse Keeper application must be linked to at least one Designated Zone. You cannot be a Keeper of nowhere.

    3. Upload Required Documents

    The FTA needs proof that your business is legitimate and your facility is secure. You will typically need:

    • A valid copy of your UAE business license.
    • Passport and Emirates ID of the person signing the application, plus a Power of Attorney or proof of authorisation.
    • Customs Code (like Dubai Customs).
    • Floor plans of the warehouse and a description of your security systems (CCTV, guards, fencing).

    4. FTA Review and Approval

    After you click “Submit,” the FTA begins its review. It usually takes the FTA about 20 business days to review a completed application. Don’t be surprised if an FTA representative asks to visit your warehouse to check your security measures in person.

    5. Pay the Fees and Provide a Guarantee

    Once you get the initial approval, there are two final hurdles:

    • Registration Fee: You will need to pay the registration fee (usually via the portal).
    • Financial Guarantee: The FTA will require a bank guarantee. The amount is based on your risk profile and the value of the goods you store.

    6. Receive Your Certificate

    Once the payment and guarantee are processed, the FTA will issue your Warehouse Keeper Registration Certificate and a unique Registration Number. You are now officially authorized to operate.

    What is the Cost of Warehouse Keeper Registration?

    The FTA charges a fee for the 12-month registration of each Designated Zone you manage. As of 2026, the FTA has scrapped the fees for digital Warehouse Keeper Registration Certificates. You can now download your QR-verified certificate for free.

    Late Registration Fine (AED 20,000): This is the cost you don’t want to pay. Failing to register within 30 days of starting your activity triggers this heavy penalty.

    The Financial Guarantee: This is the most significant financial part of the process. The FTA requires a bank guarantee to act as insurance for the taxes you are holding.

    • Minimum Amount: AED 175,000.
    • Maximum Amount: Can go up to AED 25 million.

    How it’s calculated: The FTA looks at your risk profile and the total value of excise goods you plan to store. If you have a clean history and high-security systems, your guarantee may be on the lower end.

    Warehouse Keeper Renewal in the UAE

    Getting your registration is a big win, but in the UAE, staying compliant is an ongoing commitment. The Federal Tax Authority (FTA) requires you to prove every year that your warehouse still meets their high standards for security and tax management.

    The Renewal Process:

    As of 2026, the FTA has made it very clear: The burden of renewal is on the Warehouse Keeper. You won’t always get a nudge, so you need to be proactive. You must submit your renewal application at least 20 business days before your current 12-month registration expires.

    Log in to your EmaraTax portal, go to Designated Zone Management, and select the “Amend/Renew” option for your zone. You’ll need an updated Financial Guarantee (if your stock levels have changed significantly), updated security reports or CCTV logs, and a declaration of the average month-end stock value for the past year.

    There is an annual renewal fee of AED 2,000 for each Designated Zone you manage.

    Stay Compliant, Stay Operational

    In the UAE’s highly regulated trade and logistics environment, compliance is not something businesses can afford to overlook. Proper warehouse keeper registration and timely renewal help ensure smooth operations, uninterrupted storage, and full alignment with tax and customs regulations. Being proactive with compliance also reduces the risk of fines and operational disruptions.

    For businesses that want clarity and peace of mind, expert support can simplify the process. Shuraa Tax supports UAE businesses with ongoing tax compliance, advisory, and regulatory guidance, helping you stay on the right side of the law while focusing on growth. Having the right experts by your side makes registration and renewal far less complicated.

  • Foreign Tax Credit Advisory in the UAE

    Foreign Tax Credit Advisory in the UAE

    Living and working in the UAE has always been a smart move for your wallet. But as the world gets more connected, things are getting a bit more complicated. It’s no longer just about the money you make in Dubai or Abu Dhabi; many UAE residents and businesses now have income flowing in from all over the map, through rental property in the UK, stock dividends from the US, or a tech startup in India.

    Because the UAE now has its own corporate tax system, managing that international money requires a bit of a game plan. That’s where Foreign Tax Credit (FTC) advisory comes in.

    If you’re earning money abroad, you’ve probably noticed that the country where you earned the money usually wants a cut, and now the UAE tax office might be looking at that same income. This is the double taxation trap, and it’s one of the biggest headaches for residents today.

    Foreign tax credit advisory helps businesses and individuals understand how taxes paid in another country can be adjusted or claimed, so you’re not paying more tax than necessary. Many UAE-based businesses earn income through foreign branches, international clients, or overseas investments. Similarly, residents may earn salaries, consultancy income, dividends, or rental income from other countries. Managing the tax side of this cross-border income can be confusing and stressful without the right guidance.

    Foreign tax credits are meant to ease this burden by reducing or offsetting taxes paid overseas, helping you avoid double taxation. If you’ve already paid tax on your income in another country, the UAE allows you to subtract that amount from what you owe here.

    What Is a Foreign Tax Credit (FTC)?

    A Foreign Tax Credit (FTC) is a tax relief that helps prevent your income from being taxed twice. It means, if you have already paid tax on your income in another country, a foreign tax credit allows you to reduce your tax liability on that same income under applicable tax laws. This is especially helpful for UAE businesses and residents earning income from overseas.

    How Does a Foreign Tax Credit Work?

    When income is earned outside the UAE, and tax is paid in a foreign country, that tax amount may be claimed as a credit against the tax payable in the UAE (subject to rules and limits). Instead of paying tax twice on the same income, the foreign tax paid is adjusted, making your overall tax burden more manageable.

    Foreign Tax Credit vs Tax Deduction: What’s the Difference?

    Although they sound similar, a tax credit and a tax deduction work very differently:

    Feature Foreign Tax Credit Foreign Tax Deduction
    How it works Subtracted from the final tax you owe. Subtracted from your total income before tax is calculated.
    Value Worth the full amount (100% value). Worth only a fraction (based on your tax rate).
    The Result Usually saves you much more money. Reduces the taxable amount, but you still pay tax on the rest.

    Types of Foreign Taxes That May Qualify for Credit

    Not all foreign taxes are eligible, but commonly qualifying taxes include:

    • An Income-Based Tax: It must be a tax specifically on profits or income (like Corporate Tax or Withholding Tax).
    • A Final Tax: You must have actually paid it to a foreign government and have proof (it can’t just be a potential tax).
    • Non-Refundable: If you can get the tax back from the foreign country through a refund, the UAE won’t give you a credit for it.

    Common Examples:

    • Withholding Tax: Often taken out of dividends, interest, or royalties earned abroad.
    • Corporate Income Tax: Paid by your branch or business office located in another country.

    Indirect taxes like VAT or Sales Tax usually do not count as a Foreign Tax Credit. Those are handled differently in your accounting.

    Does the UAE Allow Foreign Tax Credits?

    Yes, the UAE allows for Foreign Tax Credits. In fact, since the introduction of Corporate Tax, the UAE has made it a core part of its tax framework to stay business-friendly and aligned with international standards.

    Overview of the UAE’s Tax Framework:

    For a long time, the UAE didn’t need a Foreign Tax Credit (FTC) because there was no federal corporate tax. However, that changed with Federal Decree-Law No. 47 of 2022.

    Under the current rules:

    • Taxable Persons: Most businesses and certain individuals (earning over AED 1 million from business activities) are subject to a 9% Corporate Tax on profits exceeding AED 375,000.
    • Worldwide Income: If you are a UAE resident, the government looks at your income from all over the world, not just what you earn inside the Emirates. Because of this, the FTC was introduced to prevent you from being punished for doing business globally.

    The UAE has one of the world’s largest networks of tax treaties, with over 140 agreements in place (including major partners like India, the UK, and China).

    These agreements are designed to prevent the same income from being taxed twice. Under DTAAs, relief is usually provided through:

    • The foreign tax credit method, where tax paid overseas is credited against UAE tax, or
    • The exemption method, where certain foreign income is excluded from UAE taxation

    DTAAs also clarify which country has the right to tax specific types of income, such as business profits, dividends, interest, or royalties.

    How Foreign Tax Credit Applies Under UAE Corporate Tax?

    The FTC is the primary tool used to reduce your UAE tax bill. However, there are two golden rules you need to know: 

    1. The “Lesser Of” Rule: The credit you get is limited to the lower of two amounts: 

    • The actual tax you paid to the foreign government.
    • The UAE Corporate Tax due on that same income.

    2. Use It or Lose It: If you pay 15% tax in a foreign country, but the UAE tax is only 9%, you can only claim a credit for 9%. The remaining 6% cannot be refunded or carried forward to next year; it simply expires. 

    Relevance for UAE Businesses with Foreign Income or Branches:

    If your UAE company has a branch or a Permanent Establishment (PE) in another country, you have two main options to handle taxes:

    • Option A: Claim the FTC (The Credit Method): You include the branch’s profits in your UAE tax return, calculate the 9% UAE tax, and then subtract the foreign tax you already paid.
    • Option B: Foreign Branch Exemption: In some cases, you can choose to completely exempt the profits of your foreign branch from UAE tax altogether. This is often simpler if your branch is in a high-tax country, as it removes the need to calculate credits every year.

    Who Needs Foreign Tax Credit Advisory in the UAE?

    Foreign tax credit advisory in the UAE is not just for large multinational companies. It is equally important for businesses and individuals who earn income from outside the UAE and may already be paying tax in another country.

    1. UAE businesses with overseas operations

    Companies that have foreign branches, subsidiaries, or permanent establishments often pay corporate tax in other countries. Foreign tax credit advisory helps ensure that these taxes are properly adjusted under UAE Corporate Tax rules and relevant DTAAs.

    2. Multinational companies operating in the UAE

    Businesses that earn income across multiple countries face complex tax reporting and compliance requirements. Advisory support helps manage foreign taxes efficiently while aligning with UAE Corporate Tax regulations.

    3. UAE residents earning income from abroad

    Individuals who receive salaries, consultancy fees, dividends, rental income, or investment income from overseas may face foreign tax deductions. Understanding how foreign taxes apply and whether relief is available is key to avoiding double taxation issues.

    4. Freelancers and consultants with international clients

    Professionals working with overseas clients often face withholding taxes on their income. Foreign tax credit advisory helps clarify tax treatment and documentation requirements.

    5. Investors with foreign assets or investments

    Those earning dividends, interest, or capital gains from foreign investments can benefit from advisory support to correctly assess tax exposure and claim eligible relief.

    Foreign Tax Credit Under UAE Corporate Tax Law

    Under Article 47 of the Federal Decree-Law No. 47 of 2022, the UAE Corporate Tax (CT) regime provides a formal mechanism for claiming Foreign Tax Credits (FTC).

    When Can Foreign Tax Paid Be Claimed?

    You can claim a credit only if you meet the Double Tax criteria:

    • The Income is Taxable in the UAE: The credit only applies to income that is included in your UAE Corporate Tax return. If the income is already exempt (like certain dividends under the Participation Exemption), you cannot claim a credit for any taxes paid abroad on that same income.
    • The Tax Was Actually Paid: You must have paid the tax to a foreign government (federal or state level) or have a legal obligation to pay it that is documented and final.

    Conditions and Limitations for FTC Claims:

    While foreign tax credits are allowed, they are subject to certain rules:

    • The Nature of Tax Condition: The foreign tax must be similar to the UAE Corporate Tax. It must be a tax on profits or net income. Indirect taxes like VAT, Sales Tax, or Customs Duties do not qualify for a credit.
    • The Maximum Cap: You can only claim a credit up to the amount of UAE tax that would have been due on that specific income. For example, if you paid 15% tax in a foreign country, but the UAE tax rate is only 9%, your credit is capped at 9%. You cannot use the extra 6% to lower the tax you owe on your local UAE income.
    • Proof of Payment: The Federal Tax Authority (FTA) requires official receipts, withholding tax certificates, or copies of the filed foreign tax return as evidence.

    How to Calculate the Allowable Credit?

    The foreign tax credit is calculated by comparing:

    • The foreign tax actually paid, and
    • The UAE Corporate Tax due on the same foreign income

    The lower of the two amounts is allowed as a credit. This ensures that the credit does not exceed the UAE tax liability related to that income.

    Unlike some countries (like the US), the UAE does not allow you to carry forward unused Foreign Tax Credits. If your foreign tax was higher than your UAE tax in 2025, you cannot save that extra credit to use in 2026. You cannot apply current foreign tax credits to previous years’ tax bills.

    Any excess foreign tax paid over the UAE’s 9% limit is simply lost. It cannot even be deducted as a regular business expense.

    Shuraa Tax Foreign Tax Credit Advisory Services in the UAE

    At Shuraa Tax, we support businesses at every stage of their cross-border tax journey. Our advisory services are designed to simplify foreign tax credit claims, reduce tax risks, and ensure full compliance with UAE Corporate Tax laws and applicable DTAAs.

    • Review and Analysis of Foreign Income and Taxes Paid: We carefully review your foreign income streams and assess the taxes already paid overseas. This helps identify which income qualifies for the foreign tax credit and highlights any gaps or risks before filing.
    • DTAA Interpretation and Application: With the UAE having an extensive DTAA network, understanding treaty provisions is critical. Our experts interpret relevant DTAAs and apply the correct relief method, based on your business structure and income type.
    • Accurate FTC Calculation and Proper Documentation: We ensure your foreign tax credit is calculated accurately in line with UAE Corporate Tax rules. Our team also helps compile and verify all required documentation, reducing the risk of errors or future disputes.
    • Corporate Tax Return Support and Compliance: Shuraa Tax provides complete support for UAE Corporate Tax return preparation and filing, ensuring foreign tax credits are correctly reflected and compliant with FTA requirements.
    • Ongoing Advisory for Cross-Border Taxation: Cross-border tax obligations don’t end with one filing. We offer ongoing advisory support to help you plan future international transactions, manage foreign tax exposure, and stay updated with regulatory changes.

    Shuraa Tax helps you turn foreign tax credit challenges into well-planned tax solutions in the UAE. We align your cross-border income with UAE Corporate Tax rules to support long-term business growth.

    Commonly Asked Questions

    1. Can I claim a credit for VAT or Sales Tax paid abroad?

    No. The Foreign Tax Credit (FTC) only applies to taxes levied on income or profits, such as Corporate Tax or Withholding Tax. Indirect taxes like VAT, GST, or Customs Duties do not qualify.

    2. Can individuals in the UAE claim foreign tax credits?

    While the UAE does not levy personal income tax, foreign tax credit considerations mainly apply to businesses under Corporate Tax and through DTAA provisions.

    3. Do I need a tax treaty (DTAA) to claim a Foreign Tax Credit?

    No. The UAE allows for unilateral tax credits. This means you can claim the credit even if the UAE doesn’t have a specific tax treaty with that country, provided you have proof that the tax was paid.

    4. Does the 0% Corporate Tax rate for Free Zones affect my credit?

    Yes. If your Free Zone company is a Qualifying Free Zone Person paying 0% tax, you won’t have a UAE tax bill to offset. Therefore, you cannot claim a credit for any taxes paid abroad.

    5. Can individuals claim FTC, or is it only for companies?

    Individuals can claim FTC if they are subject to UAE Corporate Tax. In 2026, this applies to individuals (like freelancers or sole traders) whose business turnover in the UAE exceeds AED 1 million.

  • What are the Advantages of Internal Audit

    What are the Advantages of Internal Audit

    Running a business in today’s business world is about much more than just making sales or keeping accounts updated. Businesses are expected to be transparent, well-managed, and compliant with the law. This is where the internal audit plays a crucial role. Rather than being just a compliance exercise, internal audit helps organisations understand how well their processes, controls, and risk management systems are actually working.

    UAE regulatory expectations have grown significantly in recent years. With VAT, Corporate Tax, AML requirements, and other compliance rules in place, authorities now expect businesses to maintain proper records and strong internal controls. It doesn’t matter if you operate in the mainland or a free zone, internal audit has become an important tool to stay compliant, avoid penalties, and build credibility with regulators, banks, and investors.

    Strong internal controls are not only important for large corporations. Small and medium-sized businesses, startups, and growing companies in the UAE also enjoy the benefits of internal audits.

    What Exactly Is Internal Audit?

    An internal audit is a regular review of your business’s activities to make sure everything is running the way it should. It isn’t just about the money; it’s about processes. The auditor looks at how you manage risks, how you handle your paperwork, and whether your staff are following the company’s own rules.

    The goal is to answer three questions:

    1. Are we doing things right?
    2. Are we following the law?
    3. Can we do things better or cheaper?

    Internal Audit vs. External Audit

    Internal Audit:

    • Conducted throughout the year or at regular intervals
    • Focuses on internal controls, business processes, and risk areas
    • Helps improve efficiency, strengthen controls, and ensure ongoing compliance
    • Reports are mainly for management and business owners

    External Audit:

    • Usually conducted once a year
    • Focuses mainly on verifying financial statements
    • Required for regulatory or statutory purposes
    • Reports are shared with authorities, banks, or stakeholders

    Who Needs Internal Audit Services in the UAE?

    While almost any business can benefit, it is especially critical for:

    1. Public Joint Stock Companies (PJSCs): UAE-listed companies are legally required to have an internal audit function.
    2. Regulated Industries: Companies overseen by the UAE Central Bank or the Securities and Commodities Authority (SCA) (like banks and insurance firms).
    3. SMEs and Family Businesses: To prevent internal leaks (like fraud or inventory loss) and to prepare for the new UAE Corporate Tax.
    4. Companies in Free Zones: Many free zones (like DIFC or ADGM) have their own strict governance rules that an internal audit helps you meet.
    5. Retailers in Malls: Large malls in Dubai often require audited sales reports to verify lease agreements.

    Key Advantages of Internal Audit in the UAE

    For businesses operating in the UAE’s regulated and competitive environment, an internal audit acts as a support system that improves control, reduces risk, and strengthens overall performance. Here are the key advantages:

    1. Strengthens Corporate Governance

    Internal audit helps management and leadership maintain better oversight of business operations. It ensures roles, responsibilities, and decision-making processes are clearly defined and followed. This improves accountability across departments and supports ethical, well-managed business practices, something regulators and investors in the UAE value highly.

    2. Ensures Compliance with UAE Laws & Regulations

    The UAE regulatory landscape has changed significantly with VAT, Corporate Tax, and AML (Anti-Money Laundering) laws. An internal audit acts as your early warning system. It checks your records throughout the year so that when the government authorities come knocking, you are already fully compliant and don’t have to worry about heavy fines.

    3. Improves Risk Management

    Every business faces risks such as, financial, operational, or compliance-related. Internal audit helps identify these risks early, assess their impact, and suggest ways to manage or reduce them. Instead of reacting to problems later, businesses can take proactive steps to protect themselves.

    4. Enhances Internal Controls & Processes

    Internal audit reviews day-to-day processes to see what’s working and what isn’t. It highlights weak controls, duplicate work, or inefficient systems and recommends improvements. This leads to smoother operations, better use of resources, and stronger internal discipline.

    5. Prevents Fraud & Financial Irregularities

    Unfortunately, internal fraud can happen in any company. Internal audit creates a strong deterrent. When employees know that a regular, independent review is taking place, the likelihood of shady activity drops significantly. If something is wrong, the audit is designed to catch it early.

    6. Supports Business Growth & Scalability

    As businesses grow, their systems and controls must grow with them. Internal audit ensures that financial systems, compliance frameworks, and operational processes are strong enough to support expansion, new branches, or increased transaction volumes without creating risks.

    7 Builds Trust with Stakeholders

    Strong internal audit practices build confidence among investors, banks, regulators, and business partners. It shows that the company is well-managed, transparent, and serious about compliance. This trust can make it easier to secure funding, partnerships, or approvals in the UAE market.

    How Often Should Internal Audits Be Conducted in the UAE?

    There is no fixed rule in the UAE for how often internal audits must be conducted. The frequency mainly depends on the size of the business, its activities, and the level of risk involved.

    For most UAE businesses, an annual internal audit is usually sufficient to review compliance, internal controls, and financial processes. Companies operating in high-risk or highly regulated sectors may need quarterly or half-yearly audits to stay on top of risks and regulations.

    Many businesses also follow a risk-based approach, where high-risk areas are audited more frequently than low-risk ones. In short, internal audits should be done regularly and based on business needs, not just as a one-time exercise.

    Internal Audit in the UAE: Mainland vs Free Zone Companies

    Although mainland and free zone companies in the UAE are regulated by different authorities, both are expected to maintain proper compliance, transparency, and internal controls.

    Internal Audit for Mainland Companies:

    Mainland companies are licensed by the Department of Economic Development (DED) and fall under the UAE Commercial Companies Law.

    • Under Federal Law No. 32 of 2021, almost all mainland LLCs and Joint Stock Companies are required to have their accounts audited annually.
    • With the 9% Corporate Tax now in full swing, the Ministry of Economy and the Federal Tax Authority (FTA) expect mainland companies to have strong internal records.
    • In the mainland, banks and government departments (for visa quotas) often require audited financial statements as proof of a company’s legitimacy and health.

    Internal Audit for Free Zone Companies:

    Free Zones (like IFZA, DMCC, JAFZA, or DIFC) operate like mini jurisdictions with their own specific rules.

    • Some free zones require an audit report to be submitted every year during license renewal, while others only ask for it if your revenue crosses a certain threshold (e.g., AED 1 million to 5 million).
    • Qualifying Free Zone Persons (QFZP): If you want to benefit from the 0% Corporate Tax rate in a Free Zone, you must maintain audited financial statements. Without them, you could lose your tax-exempt status.
    • Even if your specific free zone doesn’t force you to submit an audit today, the best practice is to conduct an annual internal audit to ensure you are meeting Economic Substance Regulations (ESR) and AML requirements.

    Choose the Right Internal Audit Firm in the UAE

    Internal audit is not just about ticking compliance boxes, but it helps improve governance, manage risks better, strengthen internal controls, prevent fraud, and build trust with banks, investors, and authorities. For UAE businesses of all sizes, internal audit brings clarity and control to daily operations.

    However, these benefits of internal audits depend a lot on choosing the right internal audit firm in the UAE – one that understands local regulations and real business needs.

    At Shuraa Tax, we offer end-to-end internal audit support for both mainland and free zone businesses- including internal audit solutions and deep expertise in UAE VAT, Corporate Tax, and regulatory compliance. Get in touch today, and we’ll ensure your business stays compliant, well-controlled, and ready for sustainable growth.

    Commonly Asked Questions

    1. Is internal audit mandatory in the UAE?

    Internal audit is not mandatory for all businesses, but many companies are expected to have strong internal controls, especially those subject to regulatory, tax, or compliance requirements.

    2. What are the main benefits of internal audits for UAE businesses?

    The key benefits of internal audits include better compliance, stronger risk management, improved internal controls, and reduced chances of fraud or errors.

    3. How is internal audit different from external audit?

    Internal audit focuses on improving processes and managing risks within the business, while external audit mainly verifies financial statements for regulatory or statutory purposes.

    4. Are free zone companies required to conduct internal audits?

    Free zone companies are not always required by law, but internal audits help them follow best practices, meet tax obligations, and maintain proper governance.

    5. Do small businesses in the UAE need internal audit services?

    Yes, small businesses and startups can benefit from internal audits, especially if they are registered for VAT, Corporate Tax, or planning to scale.

  • VAT Treatment on Financial Services in the UAE

    VAT Treatment on Financial Services in the UAE

    VAT can feel confusing on its own, and when you add financial services to the mix, things get even trickier. VAT in UAE applies to most goods and services, but financial services don’t always follow the same rules. That’s because many of these services involve interest, margins, or complex fee structures, so the VAT treatment is a little different from regular transactions.

    If you’re a bank, insurance company, lender, fintech startup, or even a business that deals with financial transactions from time to time, understanding these VAT rules is really important. A small mistake like charging VAT when you shouldn’t, or missing VAT when it should apply, can lead to compliance issues or penalties. That’s why staying updated with the rules related to the VAT on financial services in the UAE and the latest Federal Tax Authority (FTA) guidelines matters.

    What Counts as Financial Services under UAE VAT Law?

    To get the tax treatment right, you first need to know if your activity actually qualifies as a “Financial Service” in the eyes of the Federal Tax Authority (FTA).

    According to UAE VAT Executive Regulations (specifically Article 42), Financial Services are broadly defined as services connected to dealings in money (or its equivalent) and the provision of credit. Essentially, if your business involves exchanging currency, providing loans, or managing accounts where money is stored, you are likely operating in this sector.

    Some of the common examples of financial services under UAE VAT regulations include:

    • Interest-based lending such as personal loans, business loans, and mortgages
    • Deposit-taking activities like savings accounts and fixed deposits
    • Money transfers and remittance services
    • Currency exchange services
    • Issuing, transferring, or trading securities, including shares, bonds, and Sukuk
    • Insurance services, both life and general insurance
    • Credit card services, including issuing cards or managing payments
    • Investment management services and brokerage activities

    Traditional Financial Services vs Fintech/Digital Financial Services

    The line between a “tech company” and a “finance company” is blurrier than ever. However, for VAT purposes, the distinction is vital because the nature of the income often dictates the tax rule.

    1. Traditional Financial Services: These are the classic banking activities. The revenue is usually generated through implicit margins (like interest spreads).

    For example, a traditional bank lends money for a house and charges 5% interest. This interest income is generally exempt from VAT.

    2. Fintech & Digital Financial Services: Fintech companies often provide financial services but charge for them differently, usually through explicit fees or subscriptions.

    For example, a digital payment app charges a “transaction fee” or a “platform subscription” to let users send money. Because this is a clear fee for a service (and not just an interest margin), it is often Standard Rated (5%).

    The FTA looks at what is being supplied, not just who is supplying it. Even if you call yourself a technology company, if you are facilitating financial transactions for a fee, you fall under these VAT rules.

    What is the VAT on Financial Services in the UAE?

    Financial services in the UAE don’t all fall under one type of VAT treatment. Depending on how the service earns its income – whether through margins, interest, or clear fees, it may be zero-rated, exempt, or standard-rated at 5%.

    A. Zero-Rated Financial Services (0% VAT)

    This is the most beneficial category for businesses. When a service is “Zero-Rated,” you charge the customer 0% VAT, but you are still allowed to claim back the VAT on your own business expenses (like software or rent).

    When does this apply? This mostly applies to exported services. If you are a UAE bank or financial institution providing services to a recipient who is outside the UAE (and outside the GCC VAT implementing states), the service is typically Zero-Rated.

    Examples:

    • Financial services provided to a non-resident client (e.g., a Dubai firm advising a client in London).
    • International money transfers where the transaction happens cross-border.

    B. Exempt Financial Services (No VAT Charged)

    “Exempt” means you do not charge VAT to the customer. However, there is a catch – if your revenue is exempt, you generally cannot claim back the VAT you paid on expenses related to that service. This effectively becomes a cost to the business.

    When does this apply? This category covers “passive” income where the bank or lender makes money through a margin or spread rather than a direct fee. It implies that the value is hidden in the interest rate or exchange rate.

    Examples:

    • Interest Income: Interest earned on loans, mortgages, or credit cards.
    • Life Insurance: Premiums for life insurance policies are typically exempt.
    • Issue of Securities: Issuing or transferring ownership of shares or bonds.
    • Currency Exchange Margins: The difference between the “buy” and “sell” rate of a currency (if no separate fee is charged).

    C. Standard-Rated Financial Services (5% VAT)

    This is the default category for most business services. Here, you charge the standard 5% VAT on the bill, and you can claim back the VAT on your business expenses.

    • When does this apply? This applies to services that are fee-based. If there is a specific charge for a specific action – like an administration fee, a commission, or a subscription- it is considered a standard commercial service and is taxed at 5%.

    Examples:

    • Bank Charges: Monthly account maintenance fees, wire transfer fees, or ATM withdrawal fees.
    • Card Fees: Annual membership fees for credit cards.
    • Advisory & Consultancy: Fees charged for investment advice or wealth management planning.
    • Brokerage Fees: Commissions charged by a broker for buying/selling stocks.
    • General Insurance: Unlike life insurance, policies for cars, health, and property are usually subject to 5% VAT.

    VAT Treatment on Fee-Based vs Margin-Based Transactions

    One of the biggest factors that decides how VAT applies to a financial service in the UAE is how the provider earns money from the transaction.

    Fee-Based Transactions – Standard Rated at 5%

    Fee-based transactions are the easiest to identify for VAT purposes. Here, the financial institution charges a clearly stated fee for the service. Since the payment is fixed and transparent, the UAE VAT Law treats these services as taxable at the standard rate of 5%.

    Examples of fee-based financial services include:

    • Loan processing or application fees
    • Credit card annual fees
    • Brokerage fees for buying or selling securities
    • Investment or fund management fees
    • Bank statement issuance charges
    • Administrative or service charges

    Why these are taxable:

    There is a direct, measurable fee that counts as “consideration,” making VAT calculation straightforward.

    Margin-Based Transactions – Exempt from VAT

    Margin-based transactions work differently. Instead of charging a fixed fee, the financial institution earns money from the margin or difference in price, such as interest or spread. Because there isn’t an explicit fee tied to the service, these transactions are treated as exempt from VAT.

    Examples of margin-based financial services include:

    • Interest earned on loans or credit facilities
    • Currency exchange margins
    • Trading securities where income comes from price differences
    • Returns on fixed deposits or savings accounts

    Why these are exempt:

    There’s no clear, identifiable fee that the FTA can tax. Since income is generated indirectly, VAT cannot be applied in the usual way.

    VAT Treatment on Islamic Finance Products in UAE

    Islamic finance works differently from conventional banking because it follows Sharia principles, which prohibit interest (riba). Instead of traditional lending, Islamic financial institutions use alternative contract structures like profit-sharing, leasing, or cost-plus financing.

    Even though these products look different from a legal or religious perspective, the UAE VAT Law focuses on the “economic substance” of the transaction, meaning how the product actually works in practice, not just what it is called.

    In other words: If an Islamic finance product serves the same purpose as a conventional financial product, the VAT treatment will usually be the same.

    How VAT Applies to Islamic Finance

    The FTA treats Islamic finance products just like their conventional counterparts, as long as the underlying economic activity is similar. So:

    • If the product is margin-based, it is typically exempt from VAT
    • If the product involves a clear fee, it is generally standard-rated at 5%
    • If the service is supplied to a non-resident and meets export conditions, it may be zero-rated

    Examples of Islamic Finance Products and Their VAT Treatment

    1. Murabaha (Cost-Plus Financing)

    In a Murabaha transaction, the bank buys an asset and sells it to the customer at a marked-up price, payable over time. The profit margin acts like interest in a conventional loan.

    Therefore, the income earned is usually exempt from VAT, unless there are additional service fees involved (which would be taxable at 5%).

    2. Ijara (Islamic Leasing)

    Ijara is similar to a leasing arrangement where the bank owns the asset and leases it to the customer. Lease rentals may be standard-rated at 5%, depending on the nature of the asset and terms. If the arrangement mimics interest-based financing, the margin element could be treated as exempt.

    3. Mudaraba (Profit-Sharing Partnership)

    In Mudaraba, one party provides capital and the other provides expertise, and profits are shared. Returns to the investor are similar to investment income. These are typically exempt, unless a clearly defined management fee is charged (which becomes standard-rated).

    4. Sukuk (Islamic Bonds)

    Sukuk represent ownership in an asset or project, and returns come from profit, not interest. The trading or issuing of Sukuk is treated like dealing in securities. Therefore, it is generally exempt from VAT. Any associated advisory or management fees remain taxable at 5%.

    VAT on Insurance Services in the UAE

    When it comes to insurance, the UAE VAT Law splits policies into two distinct worlds. The tax you pay depends entirely on what you are insuring – a life or a tangible asset.

    1. Life Insurance — Exempt from VAT

    Life insurance products are exempt from VAT in the UAE.

    This means:

    • No VAT is charged on premiums
    • Insurers cannot recover input VAT on related costs

    Life insurance policies usually include:

    • Whole life plans
    • Term life insurance
    • Takaful life products
    • Endowment and savings-linked life policies

    The income from life insurance is considered similar to other financial services that are interest or return-based, not fee-based. Since there’s no clear “service fee” component, VAT is not applied.

    2. General Insurance — Standard Rated at 5%

    All general or non-life insurance products are taxable at the standard 5% VAT rate. Unlike life insurance, general insurance involves clear premiums and specific risk-based services, making VAT applicable.

    General insurance includes:

    • Motor insurance
    • Health insurance
    • Property and home insurance
    • Travel insurance
    • Marine and cargo insurance
    • Liability insurance
    • Takaful general insurance

    These products offer a defined service (risk coverage) in exchange for a clear premium. Since there is a direct fee for the service, VAT applies in the usual way.

    VAT Compliance Requirements for Financial Service Providers

    To stay compliant and avoid penalties, financial services must follow clear rules around documentation, reporting, and classification.

    1. Proper Record Keeping: Providers must maintain clear records of all transactions – fee-based, margin-based, and cross-border, and keep them for at least five years.
    2. Issuing Tax Invoices (When Required): Tax invoices must be issued for standard-rated services. Exempt services don’t require an invoice, but internal records should still be kept.
    3. Correct VAT Classification of Services: Every service must be classified accurately as exempt, zero-rated, or standard-rated. Even a small mistake can cause compliance issues, so correct classification is essential.
    4. Filing Accurate VAT Returns: VAT returns must be submitted on time and must correctly show all VAT collected, VAT recoverable, and any adjustments related to exempt or zero-rated supplies.
    5. Input Tax Recovery and Apportionment: Since financial institutions make both taxable and exempt supplies, they must use an apportionment method to calculate how much input VAT they can recover.
    6. Applying the Reverse Charge Mechanism (RCM): When financial services are imported from outside the UAE, the business may need to apply the reverse charge mechanism. This requires them to account for VAT themselves, ensuring imported services are reported correctly.

    Stay on Track with the Right VAT Support

    VAT on financial services in the UAE can get complicated quickly. With different treatments for fees, margins, cross-border transactions, Islamic finance, and insurance, it’s easy for businesses to feel overwhelmed. If your business deals with financial activities in any form, it’s always a good idea to get proper guidance instead of trying to figure everything out on your own.

    At Shuraa Tax, we help businesses cut through the confusion. Our team helps businesses with everything – from VAT registration and advisory to compliance, return filing, and ongoing support. We make the rules easy to understand and handle all the technical work for you. If you ever need expert help with VAT, we’re just a call away.

    Commonly Asked Questions

    1. Are all financial services subject to VAT in the UAE?

    No. VAT on financial services in the UAE can be standard-rated (5%), exempt, or zero-rated, depending on the type of service and how the income is earned.

    2. What makes a financial service exempt from VAT?

    Services that earn income through interest, spreads, or margins, such as loans or trading in securities, are usually exempt because there is no clearly defined fee to tax.

    3. When is VAT charged at 5% on financial services?

    VAT applies at 5% when a financial service charges a clear, identifiable fee, such as advisory fees, processing fees, credit card charges, or brokerage fees.

    4. Are Islamic finance products treated differently for VAT?

    No. Islamic finance products follow the same VAT treatment as conventional products. The rules focus on the economic substance of the service, not the structure.

    5. Can financial institutions recover input VAT?

    They can recover input VAT on taxable supplies, but for exempt supplies, they must use an apportionment method to calculate how much VAT can be reclaimed. This is a key part of managing VAT on financial services in the UAE.

  • UAE Corporate Tax Registration: Who Must Register?

    UAE Corporate Tax Registration: Who Must Register?

    Corporate tax has transformed the business landscape in the UAE, bringing the country in line with global transparency and tax standards. Whether you operate a multinational company, a free zone entity, a small consultancy, or a freelance business, understanding the UAE Corporate Tax Registration rules is essential for staying compliant and protecting your license.

    The new tax framework is governed by Federal Decree-Law No. 47 of 2022, and registration is managed through the Federal Tax Authority (FTA) via the EmaraTax digital portal. Once registered, companies receive a Tax Registration Number (TRN) and are required to file an annual return, usually within nine months from the end of the financial year.

    Many assume that registration is only required for businesses that actually pay tax. However, under the law, registration is mandatory even if your income is below the taxable limit, or you qualify for exemptions. It proves your compliance, enables access to reliefs, and strengthens trust with banks, partners, investors, and regulators.

    Failing to register can result in:

    • An AED 10,000 penalty
    • Potential licensing restrictions or renewal blocks
    • Reputational risk and compliance issues

    Who Is Required to Register for Corporate Tax in the UAE?

    The Corporate Tax Law defines a wide range of entities that must complete corporate tax registration UAE procedures. Key categories include:

    1. Mainland and Free Zone Companies

    All incorporated legal entities operating in the UAE must register, regardless of size, revenue, or tax rate. This includes:

    • Mainland companies, LLCs, PJSCs, PSCs, and other registered entities
    • Free Zone companies, including those eligible for 0% tax on qualifying income
    • Holding companies and special purpose vehicles
    • Dormant companies that hold an active commercial license

    If you possess a UAE trade license, you are required to register. Free zones are not exempt from registration; only the potential tax payment varies.

    2. Foreign Companies with Taxable Nexus

    Foreign companies must register if they have a taxable presence in the UAE through:

    • A Permanent Establishment (PE), such as a branch, office, or fixed site
    • Effective place of management in the UAE
    • Income derived from real estate or immovable property inside the UAE

    Foreign investors should evaluate whether strategic decisions or operations in the UAE trigger the need for registration.

    3. Individuals Earning More Than AED 1 million Annually

    Corporate tax also applies to natural persons conducting business activities in the UAE. Must register once annual UAE business income exceeds AED 1 million, including:

    • Freelancers & consultants
    • Influencers and online earners
    • Sole proprietorships and traders
    • Independent professionals under permits or licenses

    Not included: salary income, personal dividends, savings, returns on real estate owned personally.

    4. Independent Partnerships

    Professional partnerships such as:

    • Legal firms
    • Accounting & audit firms
    • Medical or engineering partnerships

    These partnerships are treated as single taxable entities, not as individual partners.

    Who Is Exempt from Corporate Tax Registration?

    Specific categories are exempt, but may still need to apply for a TRN:

    Exempt Category Notes
    Government entities Fully exempt by law
    Government-controlled sovereign entities Exempt for specific activities
    Approved charities & public benefit organisations Must apply for recognition
    Qualifying investment funds Must meet conditions to maintain exemption
    Extractive and non-extractive natural resource activities Taxed under separate regimes

    Note: Some exempt persons must still register to file annual declarations.

    Voluntary UAE Corporate Tax Registration

    Businesses can voluntarily register before they become liable. Benefits include:

    • Enhanced credibility with banks and investors
    • Better accounting structure and record keeping
    • Easier scaling and compliance readiness
    • Ability to claim future exemptions or reliefs

    Voluntary registration does not trigger tax payments until thresholds are met.

    EmaraTax Pre-Registration

    The FTA introduced pre-registration invitations within the EmaraTax portal, encouraging businesses to register before deadlines. If your company did not receive an invitation, you should register manually without delay to avoid penalties.

    Documents Required for Corporate Tax Registration

    Below are the documents required for corporate tax registration in the UAE:

    For Companies

    • Trade license copy
    • MOA / AOA or partnership agreement
    • Passport & Emirates ID for shareholders/directors
    • Contact information and registered business address
    • Financial year details
    • Financial statements (if requested)

    For Individuals

    • Emirates ID or passport
    • Trade license or permit (for business activities)
    • Proof of UAE business income
    • Contact information and address details

    Strategic Benefits of Early Registration

    • Banking and investor confidence
    • Access to Free Zone relief & Small Business Relief
    • Smooth license renewals
    • Avoidance of penalties and delays
    • Strong compliance reputation

    Large Multinationals & OECD Pillar 2 Alignment

    For multinational groups with revenues exceeding €750 million (approx. AED 3.15 billion):

    • The UAE has implemented the Domestic Minimum Top-Up Tax (DMTT) at 15%
    • Applies to financial years beginning 1 January 2025
    • Applies to groups with multiple international entities operating across jurisdictions

    Multinationals should:

    • Review structure and data systems
    • Register all constituent entities
    • Prepare transition readiness

    Expert Guidance With UAE Corporate Tax Registration

    Understanding who needs to register for UAE Corporate Tax is the first step; executing it correctly is crucial to avoid penalties and secure compliance confidence.

    Shuraa Tax supports SMEs, free zone companies, partnerships, investors, individuals, and multinationals with complete compliance management, including:

    Start your registration with expert support

    📞 Call: +(971) 44081900
    💬 WhatsApp: +(971) 508912062
    📧 Email: info@shuraatax.com

    Frequently Aksed Questions

    Q1. Do all UAE businesses need to register for corporate tax?

    Yes. All companies must register, even if they have no profit.

    Q2. Do dormant companies need to register?

    Yes, if they still hold a valid trade license.

    Q3. Do small businesses below AED 375,000 profit need to register?

    Yes. Relief affects tax payable, not registration requirements.

    Q4. Are charities required to obtain a TRN?

    Most must register first and then apply for exemption.

    Q5. Can individuals register voluntarily below AED 1M?

    Yes, useful for credibility and growth readiness.

    Q7. Does registration mean tax must be paid?

    No. Filing is required, but payment depends on thresholds and reliefs.

    Q8. What is the penalty for late registration?

    AED 10,000.

    Q9. What if a business shuts down?

    Submit a deregistration request via EmaraTax.

  • UAE Introduces New Tiered Excise Tax on Sweetened Drinks

    UAE Introduces New Tiered Excise Tax on Sweetened Drinks

    In a major move towards promoting healthier lifestyles, the UAE government has approved a new excise tax policy on sweetened drinks, shifting from a flat-rate system to a tiered, sugar-based model. This announcement, made in early November 2025, aligns with the UAE’s ongoing public health goals and its commitment to maintaining a transparent and progressive tax environment.

    So, let’s break down what this new policy means for businesses and consumers in the UAE.

    What’s New in the Excise Tax Policy in UAE?

    Previously, all sweetened beverages (regardless of their sugar content) were subject to a flat 50% excise tax under the UAE Excise Tax Law (Federal Decree-Law No. 7 of 2017). This meant that both high-sugar and low-sugar drinks were taxed equally.

    Under the new tiered volumetric model, which is set to take effect from 1 January 2026, the excise tax will now be determined by the sugar concentration in the beverage, measured in grams per 100ml. The higher the sugar content, the higher the tax rate.

    This model makes the system fairer and more health-focused, encouraging both consumers and manufacturers to make better dietary choices.

    For instance, a beverage containing 9g of sugar per 100ml will fall under the “high-sugar” tier and be taxed at the highest rate, while one with 3g per 100ml will be taxed at the lowest rate.

    The New Tiered Sugar Tax Categories

    Under the new excise tax structure, sweetened drinks will be classified into four tiers:

    Category Sugar Content (per 100ml) Tax Tier / Expected Rate
    High-sugar drinks 8g or more Highest tax rate (above current 50%)
    Moderate-sugar drinks 5g – less than 8g Medium tax rate
    Low-sugar drinks Less than 5g Lowest tax rate
    Artificially sweetened drinks No added sugar, only artificial sweeteners 0% excise tax

     

    In short:

    • Drinks with less sugar will now cost less tax, giving companies an incentive to reformulate their products.
    • Artificially sweetened or sugar-free beverages will not be taxed, promoting healthier alternatives.
    • Drinks with only natural sugars (e.g., 100% fruit juice with no additives) will be fully exempt from excise tax.

    What Counts as a “Sweetened Drink”?

    Under the new framework, a “sweetened drink” refers to any beverage that has an added source of sugar or other sweeteners, whether they are natural or artificial.

    This definition includes not only bottled and canned beverages but also concentrates, syrups, powders, gels, and drink mixes that are meant to be diluted or prepared for consumption.

    Examples of products covered:

    • Carbonated drinks like colas and flavoured sodas
    • Energy drinks and sports drinks with added sugar
    • Sweetened iced teas, flavoured waters, and juices
    • Instant drink powders or syrups used to make sugary beverages

    Even if a drink contains natural sugars along with added sweeteners, it will fall under the excise tax scope. However, drinks that contain only natural sugar from fruits or vegetables, without any added sweeteners, will be excluded.

    Exemptions from the New Excise Tax

    Certain beverages are specifically excluded from the new Sweetened Drink definition and tiered model:

    • Energy Drinks: These remain subject to the existing, separate 100% Excise Tax calculation.
    • 100% Natural Juices: Juices made of 100% natural fruit or vegetable content with no added sugar or other sweeteners.
    • Dairy Products: Milk, dairy, and related products.
    • Infant Products: Baby formula, follow-up formula, or baby food.
    • Special-Use Beverages: Beverages and concentrates intended for special dietary or medical uses.
    • Non-Commercial & Restaurant Preparations: Drinks prepared by individuals for personal, non-commercial use, or drinks prepared in restaurants and similar places that are served in an open container for direct consumption (i.e., not pre-packaged for sale).

    Why This Change?

    The shift to a tiered model serves several important goals:

    • Encouraging Healthier Habits: With obesity and diabetes rates rising globally, the UAE’s sugar tax policy aims to discourage the overconsumption of sugary drinks and encourage healthier options.
    • Promoting Product Reformulation: Beverage manufacturers now have a strong motivation to reduce sugar levels in their products to qualify for lower tax tiers.
    • Aligning with Global Standards: Countries like the UK, Mexico, and Saudi Arabia have already adopted similar sugar tax systems, and the UAE’s move reflects its alignment with international health and taxation practices.
    • Supporting Sustainable Taxation: A tiered approach ensures fair taxation, where the tax burden is proportional to the sugar level, not just the product category.

    What UAE Businesses Need to Do?

    The Federal Tax Authority (FTA) has advised all taxable persons (producers, importers, and distributors of sweetened drinks) to start preparing early. Here’s what that involves:

    • Assess Product Formulas: Review your beverage ingredients to determine total sugar content, including natural, added, and other sweeteners.
    • Obtain Laboratory Certification: Businesses must provide a lab report from an FTA-approved UAE laboratory showing the sugar composition. The Ministry of Industry and Advanced Technology (MOIAT) will soon publish a list of accredited labs for testing and certification.
    • Update Excise Registration: Once the policy takes effect, all sweetened drinks must be registered or re-registered on the FTA’s Excise Goods portal, with the lab report as supporting documentation.
    • Review Pricing and Labels: Update your pricing structure and product labelling to reflect new tax rates and sugar content disclosures.
    • Plan Inventory Management: Transitional rules will apply to prevent stockpiling products before 1 January 2026 for tax advantages.
    • Stay Compliant: In the absence of a lab report, the FTA will automatically classify a beverage under the high-sugar category, until proper documentation is submitted, meaning higher taxes by default.

    Talk to Experts at Shuraa Tax

    The UAE’s new tiered excise tax on sweetened drinks marks a smart step toward healthier consumption habits and fairer taxation. For businesses, this means staying informed, compliant, and ready to adapt to the upcoming rules by January 2026.

    If you’re unsure how these changes affect your business (whether in excise tax registration, corporate tax compliance, or VAT reporting), Shuraa Tax is here to help. Our experts will guide you through every step, from understanding new FTA requirements to filing accurate tax reports, so you stay compliant and confident in your operations.

    Stay compliant. Stay prepared. Reach out to Shuraa Tax today and let’s make your transition to the new excise tax regime smooth and stress-free.

    Frequently Asked Questions

    1. What is the new excise tax policy on sweetened drinks in the UAE?

    The UAE has approved a new tiered excise tax system for sweetened drinks, effective 1 January 2026. Instead of a flat 50% rate, taxes will now depend on the sugar content per 100ml — higher sugar means higher tax.

    2. How will the sugar levels be classified under the new policy?

    Drinks will be divided into four categories:

    • High-sugar: 8g or more per 100ml
    • Moderate-sugar: 5g to less than 8g per 100ml
    • Low-sugar: Less than 5g per 100ml
    • Artificially sweetened only: 0% excise tax

    3. Which drinks are exempt from the new excise tax?

    Drinks containing only natural sugars with no added sweeteners are exempt. Examples include 100% natural fruit or vegetable juices, milk and dairy drinks, baby formula, and medical or dietary beverages.

    4. When will the new excise tax in the UAE come into effect?

    The new tiered excise tax model will take effect from January 1, 2026, giving businesses time to adjust their formulations, pricing, and compliance processes.

    5. Are carbonated drinks still a separate tax category?

    No. Under the new rules, Carbonated Drinks will be abolished as a separate category of Excise Good and will instead be taxed based on their sugar content and classification as Sweetened Drinks.

    6. What must businesses provide to the FTA to comply with the UAE new tax?

    Businesses must register their products and provide a lab report from a UAE-accredited laboratory detailing whether the drink has added sugar, other sweeteners, or artificial sweeteners, and showing the total sugar content.

  • Corporate Tax in Mainland Vs Freezone in the UAE

    Corporate Tax in Mainland Vs Freezone in the UAE

    The UAE introduced corporate tax in 2023, a big change for businesses across the country. The goal was to align with global standards and support the nation’s growing economy. But with this new system came one common question: How does corporate tax apply to mainland and free zone companies?

    While both fall under the same tax law, the rules aren’t exactly the same. Mainland companies are generally taxed at 9%, whereas free zone businesses can still enjoy a 0% rate on qualifying income, as long as they meet the set conditions.

    Knowing these differences is important, as it helps you stay compliant but also lets you plan your taxes smartly, which can save you both money and stress.

    What is Corporate Tax in the UAE?

    Corporate tax is a direct tax on the profits of businesses. Simply put, it’s the amount companies pay to the government based on what they earn. The UAE introduced this tax to align with international tax practices, boost transparency, and support the country’s long-term economic growth. It also helps attract responsible global investors by building a stable financial environment.

    Who Needs to Pay Corporate Tax?

    Corporate tax generally applies to:

    • All mainland and free zone companies (depending on their qualifying status)
    • Foreign businesses earning income from the UAE
    • Individuals engaged in business activities that require a commercial license

    Current Corporate Tax Rate in the UAE:

    The standard corporate tax rate in the UAE is 9% on profits above AED 375,000.

    Any income below AED 375,000 is taxed at 0%, which means small and growing businesses can operate with minimal tax burden. This threshold was introduced to encourage entrepreneurship and support SMEs.

    Key Exemptions and Relief

    Not all entities are required to pay corporate tax. The following are exempt under UAE law:

    • Government and public entities
    • Extractive and natural resource businesses
    • Certain qualifying investment funds
    • Businesses wholly owned by the UAE government

    Corporate Tax for Mainland Companies in the UAE

    Mainland companies in the UAE are fully subject to corporate tax under the Federal Decree-Law No. 47 of 2022. This means that all profits earned from business activities (both within the UAE and abroad) are taxable, unless specifically exempt. The aim is to create a fair, transparent tax environment that supports the country’s sustainable economic development.

    1. Tax rates and thresholds:

    Mainland businesses are taxed at:

    • 0% on taxable income up to AED 375,000
    • 9% on taxable income above AED 375,000 

    This tiered structure ensures small and medium-sized businesses aren’t overburdened, while larger companies contribute fairly based on their profits.

    2. Treatment of Local and Foreign Income:

    Mainland companies are required to report and pay tax on their worldwide income, meaning both local and foreign profits are subject to UAE corporate tax. However, foreign income may be exempt or credited if it has already been taxed in another country, helping to avoid double taxation.

    3. Compliance Requirements:

    To stay compliant, mainland companies must:

    • Registration: Mandatory for all taxable persons (including those benefiting from the 0% threshold). Businesses must register with the Federal Tax Authority (FTA) via the EmaraTax platform and obtain a Tax Registration Number (TRN).
    • Accounting Standard: Financial statements must be prepared according to International Financial Reporting Standards (IFRS) or other accounting standards accepted in the UAE, which serves as the starting point for calculating taxable income.
    • Filing & Payment: An annual Corporate Tax Return must be filed with the FTA, and any tax due must be paid, within 9 months after the end of the relevant financial year.
    • Record Keeping: Accurate records, including all financial statements, invoices, and supporting documents, must be maintained for at least 7 years.
    • Transfer Pricing: Mainland companies with transactions involving Related Parties (local or international) must ensure these transactions comply with the internationally recognized Arm’s Length Principle.

    Proper accounting and record-keeping are crucial, as the FTA may request to review these records during audits.

    4. Example Scenario:

    Let’s say you run a trading company in Dubai mainland that earns a profit of AED 500,000 in a financial year.

    Here’s how your corporate tax would be calculated: 

    The first AED 375,000 is taxed at 0%

    The remaining AED 125,000 is taxed at 9%, resulting in a tax amount of AED 11,250 

    Corporate Tax for Free Zone Companies in the UAE

    Free zones in the UAE have long been popular for their tax incentives and business-friendly environment. Under the new corporate tax law, free zone companies can still enjoy certain tax benefits, but these depend on whether they qualify for special treatment. In short, not all free zone businesses are automatically tax-free anymore, they must meet specific conditions to keep their 0% corporate tax rate.

    1, Corporate Tax Rate for Free Zone Companies

    Here’s how the corporate tax applies to free zone entities:

    • 0% on qualifying income (if the company meets all QFZP conditions)
    • 9% on non-qualifying income or if the company fails to maintain QFZP status

    This approach allows genuine free zone operations to retain their tax advantage while ensuring fairness across all UAE businesses.

    2. Qualifying vs. Non-Qualifying Income

    Free zone companies are taxed based on the type of income they earn:

    • Qualifying income: Subject to 0% corporate tax
    • Non-qualifying income: Subject to the standard 9% corporate tax

    Qualifying income generally includes revenue from: 

    • Transactions with other free zone companies
    • Income from foreign customers outside the UAE
    • Certain regulated activities as listed by the Ministry of Finance

    Non-qualifying income usually covers: 

    • Income from business activities conducted in the UAE mainland (unless it’s considered a “passive” source like rent or dividends)
    • Any income that doesn’t meet the qualifying criteria

    3. Who is a Qualifying Free Zone Person (QFZP)?

    A Qualifying Free Zone Person (QFZP) is a company registered in a UAE free zone that meets the required conditions to enjoy a 0% corporate tax rate on qualifying income.

    To be treated as a QFZP, a business must:

    • Maintain adequate economic substance in the UAE
    • Earn qualifying income as defined by the law
    • Not elect to be subject to mainland tax
    • Comply with transfer pricing and other FTA regulations

    If any of these conditions are not met, the company will lose its qualifying status and be taxed at 9% on all income.

    4. Conditions to Make the 0% Tax Status

    To remain a QFZP and enjoy the 0% rate, a Free Zone company must satisfy the following five non-negotiable conditions:

    1. Maintain Adequate Substance: The company must demonstrate a substantial physical presence, including:

    • Sufficient Core Income Generating Activities (CIGA) being performed in the Free Zone.
    • Adequate assets, employees, and operating expenditures in the Free Zone, relative to its business activities.

    2. Derive Qualifying Income: The majority of its income must meet the ‘Qualifying Income’ definition, subject to the De Minimis rule.

    3. No Election for Standard Rate: The company must not have voluntarily elected to be subject to the standard 9% UAE Corporate Tax.

    4. Comply with Transfer Pricing: All transactions with related parties (both inside and outside the UAE) must comply with the Arm’s Length Principle and related documentation requirements.

    5. Audited Financial Statements: QFZPs are generally required to prepare and maintain audited financial statements.

    5. Example Scenario

    Imagine a tech company in Dubai Internet City that provides software development services to clients overseas. Since its income comes from foreign customers and it operates within the free zone with real substance, it can qualify for the 0% corporate tax rate.

    However, if the same company starts offering IT services to mainland businesses directly, that portion of income will be treated as non-qualifying and taxed at 9%.

    Key Differences: Mainland vs Free Zone Corporate Tax

    Here’s a quick comparison to help you see the difference at a glance:

    Criteria  Mainland Company  Free Zone Company 
    Tax Rate  9% on taxable income above AED 375,000 0% on qualifying income; 9% on non-qualifying income
    Tax Scope  Taxed on worldwide income Taxed only on non-qualifying or mainland income
    Qualifying Status  Automatically subject to corporate tax Must meet conditions to be a Qualifying Free Zone Person (QFZP)
    Eligibility for 0% Tax  Not available Available for qualifying income under QFZP rules
    Mainland Business Dealings  Can freely trade within the UAE Restricted — direct mainland trading may trigger 9% tax
    Compliance Requirements  Must register, file annual returns, and maintain records Must register, file returns, and prove QFZP compliance annually
    Example  Trading company in Dubai mainland selling locally Tech company in Dubai Internet City serving international clients

    Common Misconceptions About Corporate Tax in the UAE

    Even though the UAE’s corporate tax law is designed to be clear, a few misunderstandings still circulate among business owners. Let’s clear up some of the most common ones:

    “All free zone companies are tax-free”

    This isn’t entirely true. While many free zone businesses still enjoy a 0% corporate tax rate, this benefit only applies to qualifying income and if the company meets the Qualifying Free Zone Person (QFZP) conditions. If a free zone company earns income from the mainland or doesn’t meet the legal requirement, such as maintaining economic substance or keeping proper records – it will be taxed at 9%, just like a mainland company.

    “Free zone companies can freely trade with mainland”

    Free zone companies cannot directly trade with the UAE mainland unless they follow specific rules. If they sell goods or services to mainland customers, they must either:

    • Work through an approved mainland distributor, or
    • Open a mainland branch or subsidiary that’s subject to corporate tax.

    Direct mainland dealings can disqualify a free zone company from the 0% tax rate, so it’s important to structure such transactions carefully.

    “Corporate tax doesn’t apply to small businesses”

    Small businesses are not automatically exempt from corporate tax. However, the UAE offers a Small Business Relief program.

    If a company’s revenue does not exceed AED 3 million in a financial year (as per the latest FTA guidelines), it can opt for this relief , meaning it will be treated as having no taxable income.

    Once the revenue crosses that limit, regular corporate tax rules apply.

    We’ll Help You Make Corporate Tax Simple

    Corporate tax can sound a little confusing at first, especially when the rules differ for mainland and free zone companies. But understanding how it applies to your business can really help you plan better and avoid surprises later. If you’re not sure where your company fits in or what steps to take, Shuraa Tax can make it easy for you.

    Our team can help with corporate tax registration and Corporate tax filing, guide free zone companies on qualifying income, and offer practical tax advice for both mainland and free zone businesses.

    With Shuraa Tax guiding you, managing corporate tax becomes simple, clear, and stress-free.

    For expert advice and support, you can reach Shuraa Tax:

    📞 Call: +(971) 44081900
    💬 WhatsApp: +(971) 508912062
    📧 Email: info@shuraatax.com

    Frequently Asked Question

    1. What is corporate tax in the UAE?

    Corporate tax is a 9% tax on the profits of businesses operating in the UAE. It applies to both mainland and free zone companies, depending on their income and qualifying status.

    2. Do all free zone companies get a 0% tax rate?

    No, only Qualifying Free Zone Persons (QFZPs) can enjoy the 0% rate and only on qualifying income. If a free zone company earns non-qualifying income or trades with the mainland, it may be taxed at 9%.

    3. What is the corporate tax rate for mainland companies?

    Mainland companies pay 0% on profits up to AED 375,000, and 9% on profits above that amount.

    4. Can free zone companies trade with the UAE mainland?

    Yes, but under certain conditions. They must either work through an approved mainland distributor or open a mainland branch, which will then be subject to corporate tax.

    5. Does corporate tax apply to small businesses in the UAE?

    Small businesses can qualify for Small Business Relief if their revenue is AED 3 million or less. This allows them to be treated as having no taxable income for that financial year.

  • Tax Savings Strategies for UAE Businesses in 2026

    Tax Savings Strategies for UAE Businesses in 2026

    The UAE has long been known as a tax-free business hub, attracting entrepreneurs and investors from across the globe. But over the years, things have changed – first with the introduction of Value Added Tax (VAT) in 2018, and then Corporate Tax in 2023. Even with these updates, the UAE still offers one of the lowest tax rates and most business-friendly environments in the world.

    In 2026, businesses are still adjusting to the new Corporate Tax system. It’s becoming clear that simply following the rules isn’t enough – smart planning can make a big difference. By using the right tax-saving strategies, businesses can reduce their tax burden legally, keep more of their earnings, and plan for long-term growth.

    So, here are some practical and effective tax-saving strategies for UAE businesses in 2026 to help you manage your taxes wisely and make the most of the UAE’s favourable tax system.

    Overview of the UAE Tax System in 2026

    The UAE’s tax system has become more structured in recent years. As of 2026, companies need to comply with three main types of taxes: Corporate Tax, Value Added Tax (VAT), Excise Tax, and the newly introduced Domestic Minimum Top-Up Tax (DMTT).

    1. Corporate Tax:

    Introduced in June 2023, the UAE’s Corporate Tax applies to business profits (exceeding AED 375,000) at a rate of 9%, making it one of the lowest in the world. The first AED 375,000 of taxable income is exempt, which helps small businesses and startups. Certain Free Zone companies may still enjoy 0% tax on qualifying income if they meet specific conditions.

    2. Value Added Tax (VAT):

    Implemented in 2018, VAT is charged at a standard rate of 5% on most goods and services. Some sectors, such as education, healthcare, and exports – may be zero-rated or exempt, depending on the nature of their transactions.

    3. Excise Tax:

    This tax applies to specific goods that are harmful to health or the environment, such as tobacco products, energy drinks, and sugary beverages. It aims to encourage healthier consumption habits and promote social responsibility.

    4. Domestic Minimum Top-Up Tax (DMTT):

    Starting June 2025, the UAE will introduce the Domestic Minimum Top-Up Tax (DMTT) to align with the OECD’s Pillar Two global minimum tax rules. Under this framework, large multinational groups with global revenues exceeding EUR 750 million will be required to pay a minimum effective tax rate of 15%.

    If a UAE entity’s effective tax rate falls below 15%, the DMTT ensures the difference is collected locally rather than by another jurisdiction, keeping tax revenues within the UAE.

    Top Tax Savings Strategies for the UAE Businesses for 2026

    As UAE businesses continue to adjust to the new Corporate Tax and DMTT framework, smart planning has become essential. Here are the top tax-saving strategies UAE businesses can use in 2026:

    1. Choose the Right Business Structure

    Your company’s structure can make a big difference in how much tax you pay.

    • Free Zone companies can still benefit from 0% Corporate Tax on qualifying income if they meet the conditions set by the UAE’s Ministry of Finance.
    • Mainland businesses, on the other hand, are subject to a 9% Corporate Tax on profits exceeding AED 375,000, but can deduct legitimate business expenses.

    Choosing the right setup based on your business model, clients, and operations can help you save significantly in the long run.

    2. Make the Most of Small Business Relief

    If your annual revenue is below the threshold specified by the UAE Corporate Tax law (currently AED 3 million until the end of 2026), you may qualify for Small Business Relief.

    This allows eligible businesses to be treated as having no taxable income, meaning you won’t need to pay corporate tax. It’s one of the simplest yet most effective ways for SMEs to legally reduce their tax burden.

    3. Keep Accurate Books and Claim Deductions

    Every dirham counts when it comes to tax deductions. Businesses can deduct expenses that are “wholly and exclusively” incurred for generating taxable income, such as:

    • Salaries and staff benefits
    • Rent and utilities
    • Marketing and advertising costs
    • Depreciation of business assets

     Keeping detailed and accurate financial records not only ensures compliance but also helps you claim every eligible deduction, reducing your taxable income.

    4. Use Group Relief and Loss Carry-Forward

    If your business is part of a group, you can transfer losses between group companies or offset past losses against future profits.

    This “group relief” mechanism allows companies to reduce their overall taxable income within the group. Additionally, unused losses can be carried forward to future tax periods.

    5. Review Cross-Border Transactions and DTAAs

    If your business deals internationally, make sure you’re making use of Double Taxation Avoidance Agreements (DTAAs).

    The UAE has signed DTAAs with 100+ countries, helping businesses avoid paying tax twice on the same income. Proper structuring of cross-border transactions, combined with transfer pricing compliance, can significantly reduce your global tax exposure while keeping you aligned with UAE tax laws.

    6. Review Related Party Transactions

    If your company has transactions with related parties (like parent companies, subsidiaries, or shareholders), ensure they are conducted at arm’s length prices – the same terms you’d use with an unrelated party.

    Proper transfer pricing documentation helps you avoid penalties and ensures compliance with UAE Corporate Tax rules. It’s also a good opportunity to identify potential areas for tax efficiency within group transactions.

    7. Take Advantage of R&D and Innovation Deductions

    If your business invests in research, technology, or product innovation, keep track of all related expenses.

    Many jurisdictions encourage innovation through tax incentives, and the UAE is increasingly supporting R&D-driven industries – particularly in technology, sustainability, and advanced manufacturing. Properly documenting these costs may help qualify for deductions or exemptions in the future as UAE tax regulations evolve.

    8. Conduct Regular Tax Health Checks

    Don’t wait for an audit to review your tax compliance. Conduct periodic tax reviews with a certified consultant to identify risks, missed deductions, or overpaid taxes.

    A professional audit or review can uncover hidden savings opportunities and help your business stay fully compliant with the latest FTA and Ministry of Finance guidelines. This proactive approach can save you time, stress, and money.

    9. Separate Personal and Business Expenses

    Mixing personal and business finances is one of the most common tax mistakes. Keeping them separate not only makes accounting easier but also ensures that only legitimate business expenses are claimed as deductions.

    Open dedicated business bank accounts and use accounting software to track transactions – this simple step can help you avoid compliance issues and maximise allowable deductions.

    10. Get Expert Consultation and Tax Planning Support

    Even with the UAE’s straightforward tax system, understanding all the rules, reliefs, and exemptions can be challenging – especially as new regulations like the Domestic Minimum Top-Up Tax (DMTT) come into play. This is where expert guidance can make a big difference.

    Partnering with experienced consultants such as Shuraa Tax ensures your business remains 100% compliant while taking full advantage of every possible tax-saving opportunity. Their team of certified tax advisors, accountants, and auditors can:

    • Identify deductions and exemptions you might overlook.
    • Help you structure your business for maximum tax efficiency.
    • Manage VAT, Corporate Tax, and DMTT filings accurately.
    • Offer ongoing support to stay updated with new FTA guidelines.

    Why Tax Planning is Essential for UAE Businesses

    Gone are the days when companies could simply rely on a “tax-free” system – now, smart financial planning is key to staying compliant while maximising profits.

    • Reduce Tax Liabilities Legally: Proper tax planning helps you take advantage of exemptions, deductions, and reliefs available under UAE law, allowing you to minimize your tax payments without breaking any rules.
    • Improve Cash Flow and Profitability: By forecasting your tax obligations in advance, you can manage your cash flow more efficiently and ensure your business retains more working capital for growth and operations.
    • Avoid Penalties and Compliance Issues: Late or incorrect filings can result in hefty fines from the Federal Tax Authority (FTA). Planning ahead ensures your returns are accurate and submitted on time, keeping you fully compliant.
    • Support Business Growth: When your taxes are well-managed, you gain better visibility into your company’s finances. This helps in making informed decisions about investments, expansion, and reinvestment opportunities.
    • Adapt to Changing Regulations: The UAE’s tax landscape is evolving quickly, and what worked last year may not work this year. Regular tax reviews and planning help businesses stay aligned with the latest laws and benefit from new reliefs or incentives.

    How Shuraa Tax Can Help Your Business Save More in 2026

    The UAE’s tax rules are changing, and 2026 is a key year for businesses to get their tax planning right. With Corporate Tax, VAT, and the new Domestic Minimum Top-Up Tax (DMTT), it can feel complicated, but a smart plan can reduce your taxes legally, improve cash flow, and help your business grow.

    This is where Shuraa Tax can help. With a team of certified tax advisors, accountants, and auditors, Shuraa Tax provides end-to-end support for your business:

    • Designing personalised tax strategies to maximise savings
    • Ensuring full compliance with UAE tax laws
    • Handling corporate tax, VAT, and DMTT filings efficiently
    • Keeping you updated on new regulations and reliefs

    With Shuraa Tax by your side, you can focus on running and growing your business, knowing your taxes are handled smartly. Start planning today and turn tax compliance into a tool for saving and growth.

    📞 Call: +(971) 44081900
    💬 WhatsApp: +(971) 508912062
    📧 Email: info@shuraatax.com

    Commonly Asked Questions

    1. What is the corporate tax rate in the UAE in 2026?

    The standard corporate tax rate is 9% on taxable profits above AED 375,000. Certain Free Zone companies may still benefit from 0% tax on qualifying income.

    2. What is the Domestic Minimum Top-Up Tax (DMTT)?

    DMTT ensures that large multinational groups with global revenues over EUR 750 million pay a minimum 15% effective tax rate. It applies if a UAE entity’s effective tax is below this threshold.

    3. Can small businesses reduce their corporate tax?

    Yes. Eligible small businesses may qualify for Small Business Relief, which can exempt them from paying corporate tax on income below the threshold.

    4. Which expenses can UAE businesses deduct to reduce taxes?

    Businesses can deduct expenses wholly and exclusively used for generating income, such as salaries, rent, utilities, marketing, and depreciation of assets.

    5. How can Free Zone companies save on taxes?

    Many Free Zones offer 0% corporate tax on qualifying income if businesses meet specific conditions set by the UAE Ministry of Finance.

  • Input VAT and Output VAT in the UAE – What’s the Difference?

    Input VAT and Output VAT in the UAE – What’s the Difference?

    The UAE introduced Value Added Tax (VAT) on January 1, 2018, at a standard rate of 5% on most goods and services. Two terms you’ll hear a lot are Input VAT and Output VAT, and knowing how they work can make a big difference to your finances.

    Simply put, Output VAT is the tax you collect from your customers when you sell goods or services, while Input VAT is the tax you pay to your suppliers when buying goods or services for your business. The difference between the two determines whether you owe money to the Federal Tax Authority (FTA) or can claim a refund.

    Knowing the difference between Input and Output VAT in UAE can save your business money and help keep your cash flow healthy.

    UAE VAT Overview

    Value Added Tax (VAT) is a type of tax that is applied to most goods and services at each stage of production and supply. In the UAE, the standard VAT rate is 5%.

    Unlike a sales tax that’s only charged at the final sale, VAT is collected at every stage of the supply chain, from manufacturing to wholesale to retail. Each business in the chain charges VAT on its sales (Output VAT) and can recover the VAT it paid on purchases (Input VAT).

    What is Output VAT?

    Output VAT is the Value Added Tax that a VAT-registered business charges and collects from its customers when it supplies taxable goods or services. In simple terms, it’s the tax portion of your sales. Since the VAT is ultimately borne by the consumer, your business acts as a tax collector on behalf of the UAE Federal Tax Authority (FTA).

    Who is Responsible for Charging Output VAT?

    Any business registered for VAT in the UAE is responsible for charging Output VAT on taxable sales. This applies to both goods and services. Businesses must issue proper tax invoices showing the Output VAT amount separately to ensure transparency and compliance.

    How Output VAT is Calculated

    Output VAT = Sale Price × VAT Rate

    Example: 

    • Sale price of a product: AED 1,000
    • VAT rate: 5%
    • Output VAT: AED 1,000 × 5% = AED 50
    • Total amount charged to the customer: AED 1,050

    The AED 50 collected is Output VAT, which your business must later report and pay to the FTA.

    Impact of Output VAT on Business Cash Flow

    • Temporary Holding: While businesses collect Output VAT from customers, this money does not belong to them. It is essentially held on behalf of the government.
    • VAT Returns: The total Output VAT collected over a period is reported in VAT returns. If your Output VAT exceeds your Input VAT (VAT paid on purchases), you pay the difference to the FTA.
    • Cash Flow Planning: Proper tracking ensures you don’t accidentally spend the Output VAT, which could cause cash flow problems when it’s time to remit it.

    What is Input VAT?

    Input VAT is the VAT that a business pays on goods or services it purchases for business purposes. Unlike Output VAT, which is collected from customers, Input VAT is something your business pays to suppliers.

    Input VAT applies to business purchases such as:

    • Raw materials and Inventory for resale.
    • Utilities (electricity, water, internet).
    • Office supplies and Equipment (laptops, furniture).
    • Professional services (accounting, legal fees, consultancy).
    • Imported goods (where Reverse Charge applies).

    How Input VAT Can Be Recovered

    Registered businesses in the UAE can reclaim Input VAT from the Federal Tax Authority (FTA) when filing their VAT returns. The amount of Input VAT can be offset against the Output VAT collected from customers.

    Formula: VAT Payable / Refundable} = Output VAT Collected – Input VAT Paid (Recoverable) 

    If Output VAT > Input VAT: Your business pays the positive difference to the FTA.

    If Input VAT > Output VAT: Your business is in a net refundable position and can either claim the excess amount back from the FTA or carry it forward as a credit against future VAT liabilities.

    Example: 

    Your business buys office furniture for AED 2,000 + 5% VAT (AED 100).

    This AED 100 is Input VAT.

    When filing your VAT return, you can subtract this AED 100 from the Output VAT collected on sales.

    Conditions for Claiming Input VAT in the UAE

    To successfully reclaim Input VAT, the following conditions must be met:

    • Valid Tax Invoice: You must have a proper VAT invoice from the supplier.
    • Business Use: The purchase must be used for business purposes. Personal expenses cannot be claimed.
    • VAT Registration: Only VAT-registered businesses can reclaim Input VAT.
    • Eligible Goods/Services: VAT paid on exempt or non-business activities cannot be claimed.

    Impact of Input VAT on Business Finances

    • Reduces Net VAT Payable: Input VAT offsets the Output VAT, reducing the total amount payable to the FTA.
    • Cash Flow Benefits: Claiming Input VAT ensures your business is not overpaying taxes and helps maintain healthy cash flow.
    • Record Keeping: Maintaining accurate invoices and purchase records is crucial to claim Input VAT without issues.

    Key Differences Between Input VAT and Output VAT

    Here’s a quick comparison to help you understand how Input VAT and Output VAT differ in the UAE.

    Feature Input VAT Output VAT
    Definition VAT paid on business purchases or expenses. VAT collected on sales of goods or services.
    Who Pays It? Business pays it to suppliers. Customers pay it to the business.
    Who Can Claim/Collect VAT-registered businesses can reclaim it from the FTA. VAT-registered businesses must collect it and remit to the FTA.
    Impact on VAT Returns Reduces the total VAT payable; can result in a refund if Input VAT > Output VAT. Increases the total VAT payable; the difference with Input VAT determines net liability.
    Examples Raw materials, office rent, utilities, professional services, equipment. Product sales, service fees, consultancy charges, retail invoices.
    Purpose Ensures businesses don’t overpay VAT on purchases. Ensures VAT is collected on taxable sales for the government.
    Documentation Required Valid tax invoice showing VAT paid; purchase must be for business use. Tax invoice issued to customer showing VAT charged.
    Effect on Cash Flow Helps reduce VAT burden and improves cash flow. Temporary cash held for the government; must be remitted to FTA.

    VAT Return Process in the UAE

    VAT-registered businesses in the UAE must file periodic VAT returns, usually quarterly or monthly depending on their revenue and the FTA’s requirements. During this process, businesses:

    1. Report Output VAT: The total VAT collected from customers on all taxable sales and services during the period.
    2. Report Input VAT: The total VAT paid on all business-related purchases and expenses, including goods, utilities, office rent, and services.
    3. Calculate Net VAT: Subtract Input VAT from Output VAT to determine the net VAT payable to the FTA or refundable from the FTA.

    Proper documentation, like valid tax invoices and receipts, is crucial to support both Input and Output VAT claims. Failure to maintain accurate records can result in fines or rejection of VAT claims.

    Other Essential Considerations for UAE Businesses

    Besides basic VAT calculations, there are a few important points businesses should keep in mind to manage VAT effectively.

    • Cross-Border Transactions: Importing goods may involve Input VAT on customs, which can also be claimed if properly documented. Export sales may be zero-rated, affecting Output VAT calculations.
    • Partial Exemptions: Businesses engaged in both taxable and exempt activities may only claim Input VAT proportionate to taxable supplies.
    • Regular Monitoring: Keeping track of VAT collected and paid throughout the period helps avoid errors and ensures timely filing of VAT returns.

    Simplify Your VAT Process with Shuraa Tax

    Knowing the difference between Input VAT and Output VAT is important for every business in the UAE. Output VAT is the tax you collect from customers, while Input VAT is the tax you pay on business purchases. Keeping track of both helps you stay compliant, avoid fines, and manage your cash flow better.

    If you want to make VAT easy and stress-free, experts like Shuraa Tax can help with registration, filings, and ongoing guidance. Get in touch today.

    📞 Call: +(971) 44081900
    💬 WhatsApp: +(971) 508912062
    📧 Email: info@shuraatax.com

    Commonly Asked Questions

    1. What is Input VAT and Output VAT?

    Input VAT is the tax your business pays on purchases and expenses, while Output VAT is the tax you collect from customers on sales. The difference determines your net VAT payable or refundable.

    2. Is Input VAT an expense?

    No, Input VAT is not a business expense if you are VAT-registered. You can reclaim it from the FTA, reducing your net VAT payable.

    3. How can I minimise my VAT liability in the UAE?

    Keep accurate records of Input and Output VAT, claim all eligible Input VAT, ensure proper tax invoices, and file VAT returns on time. Consulting experts can also help optimise VAT legally.

    4. Can I reclaim VAT on all purchases?

    No, only VAT paid on business-related purchases with valid invoices can be reclaimed. VAT on personal or non-business expenses cannot be claimed.

    5. What happens if I collect more Output VAT than I paid in Input VAT?

    If Output VAT exceeds Input VAT, you pay the difference to the FTA. If Input VAT is higher, you can claim a refund from the FTA.

  • France and UAE Double Tax Treaty: All You Need to Know

    France and UAE Double Tax Treaty: All You Need to Know

    Paying taxes in two different countries for the same income sounds unfair, right? That’s exactly why double tax treaties exist. These agreements between countries make sure you don’t end up paying tax twice on the same earnings. They clearly define where your income should be taxed – in the country where you earn it or the country where you live – making cross-border business and investment much simpler and fairer.

    The France–UAE Double Tax Treaty, first signed on 19 July 1989 and updated in 1993, is one such agreement. It sets out clear rules for how various types of income such as like salaries, dividends, capital gains, or business profits are taxed when money flows between France and the UAE. The treaty also explains what it means to be a “tax resident” and when a business is considered to have a “permanent establishment” in either country.

    This treaty is especially valuable for investors, expatriates, and companies working between France and the UAE. For example, French citizens or businesses earning in the UAE can enjoy more clarity and fewer tax obligations since the UAE does not impose personal income tax. Similarly, UAE residents or firms investing in France can benefit from reduced withholding taxes and fairer tax treatment.

    In simple terms, understanding this treaty can help you save money and plan your taxes smarter.

    What is a Double Tax Treaty?

    A Double Tax Treaty (DTT) is an agreement between two countries that ensures the same income isn’t taxed twice. Imagine you earn money in one country while living in another – without a treaty, both countries could ask you to pay tax on the same income. That’s where a DTT comes in to prevent this problem. Beyond protecting individuals and businesses from extra taxes, DTTs also encourage cross-border trade and investment.

    Overview of the France-UAE Double Tax Treaty

    The UAE and France Double Tax Treaty was signed in 1989 and came into effect in 1990. This agreement was created to make cross-border financial activities between the two countries simpler, fairer, and more predictable.

    Key Objectives:

    The treaty serves three main purposes:

    • Avoidance of double taxation: Ensures that individuals and businesses do not pay tax twice on the same income in both countries.
    • Prevention of tax evasion: Encourages transparency and cooperation between France and the UAE’s tax authorities.
    • Encouragement of mutual investment: Provides certainty and protection for investors, making it easier to invest or do business across borders.

    Taxes Covered Under the Treaty:

    The treaty mainly applies to income taxes and corporate taxes, covering various forms of income, including:

    • Salaries and wages
    • Business profits
    • Dividends, interest, and royalties
    • Capital gains

    Key Provisions of the France–UAE Double Tax Treaty

    The France–UAE Double Tax Treaty aims to prevent individuals and businesses from being taxed twice on the same income. Here’s a breakdown of the main provisions:

    1. Residence & Permanent Establishment

    • Resident: The treaty defines who is considered a “resident” of France or the UAE for tax purposes.
    • Dual residency: If a person or company qualifies as a resident in both countries, the treaty provides tie-breaker rules to determine primary residency.
    • Permanent establishment (PE): Businesses are considered to have a PE if they have a fixed place of business in the other country, which determines where business profits are taxable.

    2. Withholding Tax (WHT) Rates on Passive Income

    One of the most favourable aspects of the France-UAE DTT is the zero-rate withholding tax on key passive income streams flowing between the two countries.

    Type of Income Source Country WHT Rate (Treaty) Key Details
    Dividends 0% Dividends paid by a French company to a UAE resident (or vice-versa) are generally subject to a 0% withholding tax rate in the source country.
    Interest 0% Interest payments arising in one country and paid to a resident of the other are subject to a 0% withholding tax rate in the source country.
    Royalties 0% Royalties (payments for the use of intellectual property, patents, trademarks, etc.) are subject to a 0% withholding tax rate in the source country.

    Note: While the DTT sets the maximum rate for France to impose WHT on payments to the UAE, the UAE’s domestic law currently maintains a 0% WHT rate on most payments to non-residents (including dividends, interest, and royalties) under its Corporate Tax Law.

    3. Taxation of Capital Gains

    The treaty allocates the right to tax capital gains based on the nature of the asset being sold:

    • Immovable Property: Gains derived from the disposal of real estate (immovable property) are taxed in the country where the property is located (situs principle).
    • Real Estate Rich Companies: Gains from the alienation of shares in a company whose assets consist predominantly (typically more than 50% or 80%) of immovable property located in France are generally taxable in France.
    • Other Assets: Gains from the disposal of non-real estate assets, such as shares not related to property and other financial securities, are generally taxed only in the country where the seller is a tax resident (e.g., in the UAE if the seller is a UAE resident).

    4. Employment Income

    • UAE Residents: Employment income earned in the UAE is generally exempt from French tax, unless the individual performs services in France for more than 183 days in a year.
    • French Residents: Employment income earned in the UAE is generally exempt from French tax, subject to specific conditions.

    5. Taxation of Business Profits (Permanent Establishment – PE)

    The DTT uses the concept of a Permanent Establishment (PE) to determine when a company from one country must pay corporate tax in the other.

    • General Rule: Business profits of an enterprise of one country are only taxable in the other country if the enterprise carries on business through a PE situated in that other country. If a PE exists, only the profits attributable to that PE may be taxed in the host country.
    • Fixed Place PE: A PE typically includes a place of management, branch, office, factory, or workshop.
    • Construction/Installation Projects: A building site or construction, installation, or assembly project constitutes a PE only if it continues for a period of more than six months.
    • Dependent Agent PE: An enterprise is deemed to have a PE if a dependent agent habitually exercises authority to conclude contracts on behalf of the enterprise in the host country.

    6. Inheritance and Wealth Tax

    • Inheritance Tax: Covered under the treaty; however, French inheritance tax applies to French real estate.
    • Wealth Tax (IFI): Non-residents are subject to IFI only on French real estate; foreign assets are not taxed.

    7. Tax Residency and Treaty Benefits

    To claim treaty benefits, UAE residents must provide a Tax Residency Certificate issued by the UAE Federal Tax Authority. The treaty includes provisions to prevent abuse and ensure that benefits are not granted to entities lacking substantial economic activity.

    Who Benefits from the Treaty?

    The France–UAE Double Tax Treaty is designed to help individuals and businesses that have financial ties between the two countries. Here’s who can benefit:

    1. Expatriates and Employees

    Individuals living in one country but earning income from the other – like a French citizen working in the UAE or a UAE resident earning French dividends- can avoid being taxed twice. Salaries, pensions, and other personal income are covered, making it easier to plan finances and reduce tax liabilities.

    2. Businesses and Companies

    • Companies operating in both countries can benefit from lower withholding taxes on dividends, interest, and royalties.
    • Businesses with permanent establishments in the other country know exactly how their profits will be taxed, helping them make smarter investment and expansion decisions.
    • The treaty also encourages cross-border trade, making it easier for French and UAE businesses to collaborate without facing double taxation issues.

    3. Investors

    • Individuals or companies investing in property, stocks, or businesses in the other country benefit from reduced or exempt taxes on returns.
    • Investors enjoy legal certainty when it comes to tax obligations, making the France–UAE market more attractive for long-term investment.

    Avoidance of Double Taxation – How It Works

    One of the main goals of the France–UAE Double Tax Treaty is to ensure that income isn’t taxed twice. The treaty uses two common methods to achieve this: the exemption method and the credit method.

    1. Exemption Method

    Under the exemption method, certain types of income earned in one country are completely exempt from tax in the other country. For example, if a UAE resident earns income in France that falls under the treaty’s exemption rules, France may tax it, but the UAE will not. This method completely removes the risk of being taxed twice on the same income.

    2. Credit Method

    The credit method allows the country of residence to give a tax credit for taxes already paid in the other country. For instance, if a French resident earns income in the UAE and pays UAE taxes, France may still tax the income, but the French tax authority will deduct the UAE tax paid from the French tax liability. This ensures the total tax doesn’t exceed what would have been paid in one country alone.

    How to Claim Benefits Under the Treaty

    If you’re earning income or running a business between France and the UAE, you can take advantage of the treaty to avoid double taxation. Here’s how you can claim the benefits:

    1. Get a Tax Residency Certificate

    A tax residency certificate proves that you are a resident of either France or the UAE. This certificate is usually issued by your country’s tax authority and is required to apply for treaty benefits

    2. Determine the Type of Income

    Identify the income type (e.g., dividends, interest, royalties, business profits, employment income). The treaty provides different rules and exemptions depending on the type of income.

    3. Submit the Required Documentation

    Provide the tax residency certificate, proof of income, and any other supporting documents to the tax authority where you’re claiming relief.

    4. Apply for Tax Relief

    Depending on the method used (exemption or credit), request either a full exemption from double taxation or a tax credit for taxes already paid in the other country.

    5. Consult a Tax Expert

    The process can be complex, and small mistakes can delay or reduce your benefits. Firms like Shuraa Tax can guide you through every step, from preparing documents to submitting applications, ensuring you get the full benefit of the treaty.

    Benefits for French Businesses Investing in the UAE

    The France–UAE Double Tax Treaty provides several important advantages for French companies looking to invest or operate in the UAE:

    • Avoids double taxation: Profits earned in the UAE are generally taxed only in one country, reducing the overall tax burden and providing financial certainty.
    • No UAE withholding tax: Dividends, interest, and royalties paid to French businesses are exempt from withholding tax, allowing profits to be repatriated efficiently.
    • Clear rules on business profits: The treaty defines what constitutes a permanent establishment (PE), helping companies understand where their income is taxable and avoid disputes.
    • Encourages long-term investment: Reduced tax risks and clear regulations make the UAE an attractive destination for French businesses to expand, establish branches, or hold long-term stakes.
    • Simplifies cross-border operations: From paying employees to distributing profits or receiving royalties, the treaty provides guidance that streamlines financial and administrative processes.

    Maximize Treaty Benefits with Shuraa Tax Guidance

    The France–UAE Double Tax Treaty plays a vital role in simplifying taxation for individuals, expatriates, and businesses operating between the two countries. It helps avoid paying taxes twice and provides clear rules on how different types of income are taxed, making cross-border work and investment simpler and more predictable.

     That said, international tax rules can still be tricky. Getting advice from tax experts is important to make sure you’re following the rules, claiming all the benefits you’re entitled to, and planning your taxes in the best way. Firms like Shuraa Tax can help with treaty applications, paperwork, and smart tax planning so you don’t have to worry about mistakes.

    If you’re a French national or business operating in the UAE, Shuraa Tax can help you make the most of this treaty and ensure full compliance with UAE Corporate Tax regulations.

    For customised advice and assistance, you can reach out to Shuraa Tax:

    📞 Call: +(971) 44081900
    💬 WhatsApp: +(971) 508912062
    📧 Email: info@shuraatax.com

    Commonly Asked Questions

    1. What is the France–UAE Double Tax Treaty?

    It’s an agreement between France and the UAE to prevent individuals and businesses from paying tax on the same income in both countries.

    2. Who can benefit from this treaty?

    French or UAE residents, businesses, and investors earning income or operating in the other country can benefit.

    3. What types of income does the treaty cover?

    It covers dividends, interest, royalties, business profits, employment income, capital gains, and real estate income.

    4. How does the treaty avoid double taxation?

    Through the exemption method (income taxed in only one country) and the credit method (tax paid in one country is credited in the other).

    5. Can French businesses investing in the UAE get tax relief?

    Yes. They may benefit from reduced withholding taxes, clear rules on business profits, and legal certainty when operating across borders.