Shuraa Tax Blog

Author: Ritish Sharma

  • VAT on Construction Services in UAE: A Complete Guide

    VAT on Construction Services in UAE: A Complete Guide

    Since January 2018, the UAE has applied a 5% VAT (Value Added Tax) on most goods and services. For the construction industry, where projects are big, costly, and often run over months or even years, VAT on construction services plays a huge role. Construction services such as new builds, renovations, consultancy, subcontracted work, and even repair or maintenance usually fall under VAT, which makes it important for everyone in the sector to understand how it works.

    Because construction projects involve large sums of money and strict timelines, even a small mistake in VAT treatment can cause financial losses, rejected tax claims, or penalties. That’s why VAT compliance is not just about following the rules, it’s about protecting your business. This guide is designed for contractors, developers, subcontractors, consultants, and property owners.

    Overview of VAT in the UAE

    The Value Added Tax (VAT) was introduced in the UAE on 1 January 2018 at a standard rate of 5%. It applies to most goods and services across the country, making it one of the key taxes businesses must comply with. While the rate is relatively low compared to many other countries, its impact on day-to-day business operations is significant, especially in industries with large transactions, like construction.

    Is there VAT on Construction Services in the UAE?

    Yes, VAT is applied to most construction-related services in the UAE. This includes activities such as building new properties, renovations, consultancy, subcontracting, repairs, and maintenance. Depending on the type of property (residential, commercial, or mixed-use), the VAT treatment may vary between standard-rated (5%), zero-rated, or exempt.

    Construction is considered a taxable supply of services under the UAE VAT law. Since these services involve the supply of labour, materials, and expertise, they are treated just like other business activities that add value.

    VAT on Construction Services: What’s Covered?

    Under UAE VAT law, ‘construction services’ include any activities related to building, altering, repairing, or maintaining a property. This doesn’t just mean putting up walls; it also covers professional services like engineering, design, and project management, as well as work done by subcontractors.

    Services Subject to VAT:

    VAT applies to most construction-related services in the UAE. Key examples include:

    • Residential buildings: Construction, renovation, or maintenance of homes and apartments.
    • Commercial buildings: Offices, shops, warehouses, and other non-residential structures.
    • Renovations and repairs: Upgrades, maintenance, and repair works for both residential and commercial properties.
    • Engineering and consultancy services: Architectural design, project management, feasibility studies, and other professional services linked to construction.
    • Subcontractor services: Work carried out by subcontractors, such as electrical, plumbing, or finishing work.

    VAT on Residential Buildings

    Residential buildings are the most complex area of VAT in the real estate sector, as they are specifically treated to prevent tax from being a burden on end-users (residents). The VAT status hinges entirely on whether the property is being supplied for the first time or as a subsequent sale/lease.

    Supply Type VAT Rate Input VAT Recovery for Supplier Key Insight
    First Supply of Residential Property 0% (Zero-Rated) YES, fully recoverable. Applies to a sale or lease by the developer/builder within 3 years of the building’s completion. The 0% rate allows the developer to reclaim the 5% VAT paid on all construction costs, effectively making the development VAT-neutral.
    Subsequent Supplies of Residential Property Exempt NO, not recoverable. Applies to any sale or lease after the first supply (i.e., the resale market, or long-term rental by an investor/landlord). This status ensures no VAT is charged to the tenant or buyer but means the supplier cannot reclaim VAT on related costs (e.g., agent fees, maintenance).

    Sale vs. Lease of Residential Properties:

    • Sale: First-time sales are zero-rated, while later sales are exempt.
    • Lease: Renting out residential properties is generally exempt from VAT, so landlords do not charge VAT on rent, but also cannot claim back input VAT on expenses related to the property.

    VAT on Construction and Sale/Lease of Commercial Properties

    Construction services for commercial properties such as offices, shops, warehouses, and hotels are usually subject to the standard 5% VAT. When these properties are sold or leased, VAT is generally applied at the standard rate, unlike residential properties where some supplies may be zero-rated or exempt.

    How Commercial VAT Differs from Residential Rules

    Unlike residential buildings:

    • There is no zero-rating for the first supply. All commercial properties are generally standard-rated.
    • Leasing commercial properties also attracts VAT at 5%, whereas residential leases are exempt.

    Input Tax Recovery for Businesses

    Businesses involved in commercial construction can recover the VAT they paid on eligible expenses (known as input VAT), such as materials, subcontractor services, or consultancy fees. Proper documentation and VAT-compliant invoices are essential to claim this input VAT successfully.

    VAT Treatment for Mixed-Use Properties

    Mixed-use developments are properties that combine residential and commercial units within the same building or complex. In the UAE, VAT treatment depends on the portion of the property:

    • Residential units follow residential VAT rules (zero-rated for first supply, exempt for subsequent supplies or leases).
    • Commercial units follow commercial VAT rules (standard-rated at 5% for both sale and lease).

    Proper apportionment is crucial for developers, investors, and property managers to remain compliant and avoid penalties.

    VAT on Related Construction Services in UAE

    Construction services aren’t just about building walls, they also include many related services that are essential for completing a project. These services are generally subject to the standard 5% VAT in the UAE.

    A. Consultancy, Architectural, and Project Management Services

    These essential pre-construction and supervisory services are fully taxable. The professional providing the service must charge 5% VAT to the client (usually the developer or property owner).

    Service Category Examples VAT Rate Applied
    Consultancy Quantity surveying, legal advisory, feasibility studies, soil testing. 5% Standard Rate
    Architectural Services Building design, drawings, interior design, and master planning. 5% Standard Rate
    Project Management Site supervision, contract administration, and project coordination. 5% Standard Rate

     

    The client who pays the 5% VAT to the consultant can recover this amount in their VAT return, provided the underlying property is used for a taxable supply (e.g., commercial lease) or a zero-rated supply (e.g., the first sale of a new residential building).

    B. Interior Fit-Outs and Renovation Services

    The VAT treatment for fit-outs and renovations is critical, as it depends on whether the work constitutes a ‘new’ build or a modification to an ‘existing’ one.

    Service Type VAT Rate Applied Key Insight
    Fit-Outs & Interior Works (General) 5% Standard Rate Work done on existing properties (commercial or residential) or non-essential, decorative elements is fully taxable. This includes furniture, non-permanent partitions, and appliances.
    Renovation/Refurbishment 5% Standard Rate Any repair, conversion, or extension work on an existing building is generally taxed at 5%. The zero-rating applies narrowly only to the first supply of newly constructed residential property, not to renovations or upgrades.
    Zero-Rated Exception 0% Zero-Rated Only applies if the services and materials are supplied by a developer as part of the construction of a new residential property supplied for the first time within three years of completion.

    C. Repair and Maintenance

    Repair and maintenance (R&M) services are explicitly classified as a taxable supply of services related to real estate.

    Property Type Receiving R&M VAT Rate on R&M Service VAT Recovery for Property Owner
    Commercial Building 5% Standard Rate Yes, fully recoverable. Since the commercial rent/sale is a 5% taxable supply.
    New Residential Building (Developer) 5% Standard Rate Yes, recoverable if the R&M relates to the 0% first sale supply period.
    Existing Residential Building (Landlord) 5% Standard Rate No, not recoverable. Since the residential lease/resale is a VAT-exempt supply, the Input VAT on R&M is blocked.

    VAT Input Tax Recovery in Construction

    Input tax is the VAT a business pays on purchases or expenses that are used to make taxable supplies. In the construction industry, this can include materials, subcontractor fees, consultancy services, and other project-related costs.

    When Can Businesses Recover Input VAT?

    Construction businesses can recover input VAT if:

    • The expenses are directly related to taxable construction activities (like building commercial properties or zero-rated residential properties).
    • They have a valid VAT invoice from a registered supplier.
    • The VAT was actually paid to the supplier.
    • The business claiming the VAT must be VAT-registered with the FTA.

    Common Mistakes to Avoid:

    • Claiming input VAT on exempt supplies (like leasing residential properties).
    • Not keeping proper invoices or documentation.
    • Mixing personal and business expenses.

    Special Cases in Construction VAT

    While most construction services follow standard VAT rules, some situations require special attention:

    A. VAT on Government Projects

    Construction services provided to government entities are usually subject to the standard 5% VAT, unless a specific exemption applies. It’s important for contractors working on public projects to confirm VAT treatment before submitting invoices.

    Recent Exemption (Non-Taxable Supplies): The UAE’s updated VAT regulations introduced a critical exception for real estate transfers involving government entities. This means that the transfer of real estate (e.g., land, infrastructure) to a Government entity under certain conditions may not be considered a taxable supply.

    B. VAT in Free Zones and Designated Zones

    Some UAE free zones and designated zones have special VAT rules. For example:

    • Designated Zones: Supplies made within designated zones are often treated as being outside the UAE for VAT purposes. This means that certain sales or services provided within these zones may not attract VAT, giving businesses potential tax savings. However, it’s important to ensure the zone is officially recognized as a designated zone under UAE VAT law.
    • Free Zones: VAT rules in free zones depend on whether the zone is considered “designated” or not. Some free zones allow businesses to recover input VAT on construction and related expenses even if the supply is zero-rated or outside the UAE. Others follow standard VAT treatment similar to mainland projects.

    C. Cross-Border Construction Services

    If construction services are provided to clients outside the UAE, VAT treatment can differ:

    • Services supplied to a non-UAE customer may be zero-rated if certain conditions are met.
    • Proper documentation is essential to prove that the service qualifies as a cross-border supply.

    How Shuraa Can Help with VAT on Construction Services

    VAT affects almost every aspect of construction in the UAE, from building new properties to renovations, consultancy, and subcontractor work. Knowing how VAT applies to residential, commercial, and mixed-use projects is important to avoid penalties, extra costs, and mistakes. Following the rules also helps businesses recover input VAT and manage project expenses more effectively.

    Shuraa Tax can make this process much easier. Our team has deep expertise in VAT compliance for construction, helping businesses with VAT registration, VAT filing returns correctly, and recovering input tax. So, if you’re a contractor, developer, or consultant, Shuraa Tax ensures your business stays compliant while saving time and money.

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

  • UAE Corporate Tax Compliance: A Complete Guide

    UAE Corporate Tax Compliance: A Complete Guide

    The UAE has always been a favourite place for businesses thanks to its strong economy, modern infrastructure, and global connections. But in January 2022, the country made a big change by introducing a federal corporate tax law (Federal Decree-Law No. 47 of 2022, as amended). From 1 June 2023 onwards, companies in the UAE are required to follow this new system and pay tax on their business profits.

    This means UAE corporate tax compliance has now become a must for all businesses. It’s not only about avoiding penalties; staying compliant also helps companies build trust, keep their reputation strong, and run operations smoothly. On the other hand, ignoring these rules can lead to fines, legal troubles, and unnecessary financial risks.

    Therefore, we’ll explain everything you need to know about corporate tax in the UAE. We’ll cover who needs to pay, the tax rates, registration and filing process, penalties for missing deadlines, special rules for free zones, and practical tips to stay compliant.

    UAE Corporate Tax Overview

    Corporate tax is a direct tax on the profits earned by companies and businesses. In simple terms, it’s a percentage of a business’s net income that must be paid to the government. The UAE introduced this system to align with global standards, diversify revenue streams, and enhance transparency in its economy.

    Key Features of the UAE Corporate Tax System:

    • Introduced under Federal Decree-Law No. 47 of 2022 (as amended).
    • Standard tax rate of 9% on taxable income above AED 375,000.
    • 0% tax rate on profits up to AED 375,000 (to support small businesses and startups).
    • Free zone businesses can still enjoy 0% tax on qualifying income, provided they meet specific conditions.
    • Certain entities (like natural resource businesses and government bodies) are exempt from corporate tax.
    • Complies with OECD global tax standards and includes rules for transfer pricing and transparency.

    What is a Taxable Person?

    A taxable person is any individual or legal entity that is required to pay corporate tax in the UAE. This includes:

    • Resident juridical persons (like LLCs, PSCs, and PJSCs incorporated in the UAE).
    • Non-resident juridical persons with a permanent establishment in the UAE.
    • Natural persons (individuals) who carry on a business activity in the UAE and cross the income threshold set by the FTA.
    • Free zone entities that don’t meet conditions for qualifying income.

    In simple terms, if you’re earning business profits in the UAE (unless exempt by law), you fall under the definition of a taxable person.

    Who is Subject to UAE Corporate Tax?

    The corporate tax applies to a wide range of businesses and individuals with a business license in the UAE.

    • Mainland Companies: All UAE-registered businesses must comply, unless specifically exempt.
    • Free Zone Companies: Subject to corporate tax, but may continue to enjoy 0% on qualifying income if they meet the FTA’s requirements.
    • Offshore Companies: Also within the scope if they earn income from the UAE or manage operations here.
    • Foreign Companies/Individuals: Only taxed if they conduct trade or have a permanent establishment in the UAE.

    What are the UAE Corporate Tax Compliance Requirements?

    For businesses in the UAE, complying with corporate tax is essential to understand your obligations, meet deadlines, and keep proper financial records. Here’s a breakdown of the key requirements:

    1. Determining Your Corporate Tax Obligations

    Every business must first figure out whether it falls under the corporate tax regime. This means checking if you are a taxable person (mainland company, free zone entity, or non-resident with UAE operations) and understanding the applicable tax rates to your income, exemptions, and thresholds.

    2. Corporate Tax Registration with the Federal Tax Authority (FTA)

    All taxable businesses must register with the FTA and obtain a Tax Registration Number (TRN) before they start paying corporate tax. Key points include:

    • Registration can be done online through the FTA portal.
    • Even free zone companies may need to register if they earn non-qualifying income.
    • Failure to register on time can result in penalties and affect your ability to claim certain exemptions.
    • The FTA may require supporting documents, such as a trade license, passport copies of owners, and proof of business operations

    3. Corporate Tax Return Filing Deadlines

    Businesses must file annual corporate tax returns reporting their profits, deductions, and exemptions. Corporate Tax Returns are typically due 9 months after the end of the financial year.

    Returns must include a breakdown of taxable income, expenses, and any free zone qualifying/non-qualifying income. Late or inaccurate filings can result in financial penalties, interest on unpaid tax, or additional audits.

    4. Accounting and Bookkeeping Requirements

    Proper accounting is essential for smooth compliance. Businesses must:

    • Maintain accurate books of accounts, including ledgers, journals, and statements of income and expenses.
    • Follow International Financial Reporting Standards (IFRS) or approved local accounting standards.
    • Track all business transactions, including income, costs, assets, and liabilities.
    • Ensure digital or physical records are readily accessible for FTA review or audit.

    5. Maintaining Audited Financial Statements

    Many companies, especially those in free zones or large businesses, must maintain audited financial statements. Even when not mandatory, audits are highly recommended as they provide credibility and ensure accuracy when filing tax returns.

    6. Documentation & Record-Keeping

    Proper documentation is the backbone of compliance. Businesses must keep:

    • Financial records such as income statements, expense records, invoices, receipts, and bank statements.
    • Contracts and agreements with customers, suppliers, and related parties.
    • Transfer pricing documentation for intercompany transactions to show compliance with OECD guidelines.
    • Any supporting documents that justify deductions, exemptions, or special tax treatments.

    7. Payment of Corporate Tax

    Businesses must ensure that any corporate tax due is paid within the deadlines specified by the Federal Tax Authority (FTA). It is important to reconcile tax returns with actual payments to avoid discrepancies and ensure accuracy. Keeping proof of all tax payments is essential, as these records may be requested during an FTA audit or review.

    8. Transfer Pricing Compliance

    Businesses with related-party transactions must follow arm’s length principles, ensuring that pricing is consistent with what independent parties would agree upon. Companies are required to prepare transfer pricing reports when applicable.

    Remember, Shuraa Tax offers end-to-end corporate tax compliance services in the UAE, including tax registration, corporate tax return filing, advisory on exemptions, and transfer pricing documentation. Our expert team ensures your business meets all corporate tax compliance requirements.

    What are the Penalties for Non-Compliance?

    Non-compliance with UAE corporate tax regulations can lead to significant financial penalties. Here’s an overview of the key penalties businesses may face:

    1. Late Registration Penalty

    Failure to register for corporate tax within the prescribed timeline incurs a fixed penalty of AED 10,000, regardless of the business’s tax liability status. This penalty applies even if the business is not yet liable to pay tax.

    2. Late Filing of Tax Returns

    Businesses that miss the deadline for submitting their corporate tax returns face escalating monthly penalties:

    • AED 500 per month for the first 12 months of delay.
    • AED 1,000 per month if the delay extends beyond 12 months.

    3. Late Payment of Taxes

    If your corporate tax payment is delayed, a 14% annual penalty will start accruing from the day after the deadline. This continues until the full amount is paid, making it crucial to pay on time.

    4. Failure to Keep Proper Records

    Not maintaining accurate financial records or supporting documents can result in fines of AED 10,000 for the first offence and AED 20,000 if repeated within 2 years. Proper records are essential to support your filings and simplify any audits.

    5. Incorrect or Misleading Tax Returns

    Submitting an incorrect tax return can lead to AED 500 penalty, although this can often be avoided if the mistake is corrected before the filing deadline.

    Note: The FTA offers a penalty waiver for businesses that missed registration. If you submit your first corporate tax return within seven months of the end of your first tax period, the AED 10,000 registration penalty can be waived or refunded if already paid.

    Shuraa’s Corporate Tax Compliance Services

    Ensuring corporate tax compliance in the UAE is very important for every business. It helps you avoid fines, stay on the right side of the law, and keep your company running smoothly. From registering with the FTA to filing your tax returns and keeping proper records, each step matters for hassle-free compliance.

    Shuraa Tax is here to make the whole process easier. We offer comprehensive corporate tax compliance services in the UAE, including tax registration, filing corporate tax returns, guidance on exemptions, and transfer pricing documentation.

    Don’t let corporate tax obligations slow your business down. Contact Shuraa Tax today for expert guidance and enjoy smooth, stress-free compliance in the UAE.

    📞 Call: +(971) 44081900

    💬 WhatsApp: +(971) 508912062

    📧 Email: info@shuraatax.com

  • VAT on Educational Services in the UAE

    VAT on Educational Services in the UAE

    The UAE introduced Value Added Tax (VAT) on 1 January 2018, with a standard rate of 5% on most goods and services. The main aim was to create a new source of government revenue and reduce reliance on oil income. Under this system, businesses charge VAT on their sales and can also recover the VAT they pay on their purchases.

    When it comes to VAT on educational services in the UAE, the rules are slightly different. The UAE government has given special treatment to this sector to make sure learning stays affordable. For example, many core education services provided by qualifying institutions, like tuition fees, exams, and curriculum-related books, are zero-rated. This means no VAT is charged to parents, but schools can still claim back the VAT they spend on their costs.

    On the other hand, some services, such as student transport, are exempt, which means no VAT is charged, but schools cannot recover the VAT they pay on related expenses. There are also cases where the standard 5% VAT applies, like on school uniforms, electronic devices (laptops, tablets), canteen food, and extracurricular activities that require extra fees.

    What Is a “Qualifying Educational Institution”?

    In the UAE, not every school or training centre automatically gets special VAT treatment. To fall under the zero-rated category, an institution must be considered a “qualifying educational institution.”

    This includes:

    • Nurseries and preschools
    • Schools (primary and secondary)
    • Higher education institutions such as colleges and universities

    For an institution to qualify, it must meet two key conditions:

    • It should be owned by the federal or local government or receive at least 50% of its funding from them.
    • It must provide a recognised curriculum approved by the relevant authorities.

    If these conditions are met, many of the services offered by the institution, such as tuition fees and curriculum-related materials, can be treated as zero-rated under VAT.

    Zero-Rated VAT on Educational Services in the UAE

    Zero-rated educational services are those where VAT is applied at 0%. This means the institution does not charge VAT on the service, but it can still recover any VAT paid on its expenses. To qualify, the service must be provided by a Qualifying Educational Institution (nurseries, preschools, schools, or higher education institutions that are licensed and recognised by the UAE authorities).

    Examples of Zero-Rated Educational Services:

    • Tuition fees for nursery, primary, and secondary education.
    • Tuition fees for higher education programs (colleges, universities, and similar institutions).
    • Educational services that form part of a recognised curriculum approved by the relevant authority (KHDA, MOE, ADEK, or similar).

    Key Conditions:

    • The institution must be licensed by the competent authority in the UAE.
    • The service must relate directly to the delivery of the recognised curriculum.
    • Additional services (like school transport, uniforms, or extracurricular activities) do not qualify as zero-rated and are usually subject to 5% VAT.

    VAT Exempt Educational Services

    Not all education-related services qualify for the zero-rated VAT category. Some are treated as exempt, which means no VAT is charged to parents, but at the same time, the institution cannot recover the VAT it pays on its related costs.

    What Qualifies as Exempt:

    • Services that are not directly connected to the recognised curriculum.
    • Activities or offerings that go beyond the core purpose of education.

    Examples of Exempt Services:

    • Certain extracurricular activities (such as after-school clubs or hobby classes) if they are not an essential part of the curriculum.
    • Student transport services (home-to-school and back).
    • Student accommodation in dormitories or hostels.

    Difference Between Zero-Rated and Exempt:

    • Zero-rated services (0%): No VAT is charged, but the institution can still claim back the VAT it has paid on expenses.
    • Exempt services: No VAT is charged, but the institution cannot reclaim input VAT on related costs, which could increase overall expenses.

    Standard-Rated (Taxable) Educational Services in the UAE

    Even when an institution is recognised as a Qualifying Educational Institution, not all of its supplies fall under the zero-rated category. Certain goods and services provided by schools, colleges, or universities are treated as standard-rated, meaning they are subject to 5% VAT.

    Examples of Standard-Rated Educational Services:

    • School uniforms and clothing (including sports kits).
    • Electronic devices such as laptops, tablets, or calculators provided by the school.
    • Canteen services, including food and beverages sold to students.
    • Private tutoring or extra classes that are not part of the recognised curriculum.
    • Extracurricular activities that are charged separately and not directly linked to the curriculum.
    • Non-curriculum field trips (e.g., leisure outings).

    Commercial Activities Run by Institutions:

    If a school, university, or training centre operates commercial activities outside its core curriculum (e.g., renting out its facilities, hosting events, or selling non-educational products), those activities are also subject to 5% VAT.

    This distinction ensures that only the essential, curriculum-based educational services benefit from zero-rating, while all other commercial or supplementary services are treated like standard business activities under VAT law.

    VAT on Related Goods and Services

    In addition to tuition and core education, many schools and universities provide related goods and services. These can fall under different VAT categories depending on whether they are part of the recognised curriculum or additional offerings.

    1. Books and Printed Materials

    Zero-rated if the books or learning materials are directly related to the approved curriculum. For example, textbooks and required reading materials supplied by the school are zero-rated.

    2. Extracurricular Activities & After-School Programs

    Usually standard-rated (5%), unless they are an essential part of the approved curriculum. For example, sports clubs, music lessons, or hobby classes offered for an extra fee.

    3. Boarding School Accommodation & Meals

    Accommodation in student dormitories is generally exempt (like residential housing).

    Meals and food services provided separately (e.g., cafeteria, dining halls) are standard-rated (5%).

    So, if the goods or services are directly tied to the formal curriculum, they may be zero-rated. Otherwise, they are either exempt or taxable at the standard 5% rate.

    VAT Registration & Input Tax Recovery

    Educational institutions in the UAE must carefully assess whether they need to register for VAT, as this directly impacts their ability to charge VAT and recover input tax.

    Mandatory Registration:

    An institution must register for VAT if the value of its taxable supplies (standard-rated + zero-rated) exceeds AED 375,000 in the past 12 months, or if it expects to cross this amount in the next 30 days.

    Voluntary Registration:

    Institutions can also register voluntarily if their supplies or expenses exceed AED 187,500. This can be useful for recovering input VAT on purchases.

    Exemption from Registration:

    If a school or university makes only zero-rated supplies (e.g., tuition fees, curriculum books), it may apply for an exemption from VAT registration. However, this comes with a trade-off: the institution will not be able to reclaim input VAT on its expenses (like utilities, equipment, or maintenance).

    Input VAT Recovery Rules:

    Institutions that are VAT-registered can reclaim input VAT on most qualifying purchases.

    Exceptions:

    • Costs related to exempt supplies (e.g., student transport, accommodation).
    • Blocked expenses, such as entertainment services or vehicles used for personal purposes.

    How Shuraa Tax Can Assist

    VAT has a big impact on the education sector in the UAE, but the rules are designed to keep essential learning affordable. Tuition fees and curriculum-related books are usually zero-rated, while things like uniforms, meals, and transport are charged at 5% VAT. Some services, like extracurricular activities, may even be exempt. Knowing the difference helps schools, universities, and parents plan better and avoid surprises.

    That said, VAT on the education sector in the UAE can sometimes feel confusing. This is where expert support makes all the difference.

    At Shuraa Tax, we help schools and other educational institutions with everything related to VAT – from registration and filing to figuring out which services are zero-rated, exempt, or taxable. With our guidance, you can stay compliant, avoid penalties, and keep your operations stress-free.

    Reach out to Shuraa Tax, and we’ll make it simple for you.

    Commonly Asked Questions

    1. Is there VAT on educational services in the UAE?

    Yes. VAT applies differently depending on the type of service – some are zero-rated, some are exempt, and others are charged at the standard 5% rate.

    2. Are school fees subject to VAT in the UAE?

    Tuition fees charged by qualifying schools (nurseries, primary, secondary) are usually zero-rated if the school is licensed by the competent authority.

    3. Is VAT charged on university tuition fees?

    Yes, but if the university is a qualifying institution licensed by the Ministry of Education (MOE) or another authority, tuition fees are zero-rated.

    4. Do parents pay VAT on school transport and uniforms?

    School transport (home to school and back) is exempt from VAT. Uniforms are subject to 5% VAT regardless of the provider.

    5. Are books and learning materials subject to VAT?

    Books and printed or digital materials that are directly related to the official curriculum and supplied by a qualifying institution are zero-rated. Other materials not tied to the curriculum are subject to 5% VAT.

    6. Are extracurricular activities subject to VAT?

    Extracurricular activities offered for a separate fee are standard-rated (5%). If they’re part of the curriculum and offered without extra charge, they may be zero-rated.

  • UAE Corporate Tax Deadline 2026

    UAE Corporate Tax Deadline 2026

    The UAE introduced corporate tax in June 2023, which marks a big change for businesses in the country. Under this new system, companies must file their corporate tax returns every year, within nine months after their financial year ends. For example, if your business follows the January–December financial year, your first tax return deadline will be 30 September 2026.

    This UAE corporate tax deadline is very important because missing it can lead to serious issues, including fines, extra charges, and even interest on unpaid taxes. In some cases, repeated delays may trigger audits or affect your reputation with the Federal Tax Authority (FTA). Even free zone businesses that enjoy the 0% corporate tax rate must still file their returns on time – filing is mandatory for everyone.

    What is the UAE Corporate Tax Deadline 2026?

    The UAE’s corporate tax rules require businesses to file their returns within nine months from the end of their financial year. That means the actual deadline depends on your company’s chosen financial year.

    For businesses following the January–December financial year (calendar year): 

    Your first tax period will be 1 January 2024 to 31 December 2024, and the deadline to file your return will be 30 September 2026.

    For businesses following the April–March financial year: 

    Your first tax period will be 1 April 2024 to 31 March 2026, and the deadline to file your return will be 31 December 2026.

    What are the Key Compliance Requirements Before the Deadline?

    To make sure your business is ready for the corporate tax deadline in the UAE, there are a few important steps you need to complete in advance:

    1. Corporate Tax Registration

    Every business that falls under the corporate tax law must register with the Federal Tax Authority (FTA). Without registration, you won’t be able to file your return.

    2. Maintain Proper Financial Records

    Businesses are required to keep accurate books of accounts, financial statements, and supporting documents. These records should clearly reflect your income, expenses, and any exemptions or deductions claimed.

    3. Prepare the Corporate Tax Return

    The tax return must be completed in line with FTA requirements. This includes calculating taxable income, applying exemptions (if applicable), and ensuring all figures match your official records.

    4. File the Return on Time

    Submit your corporate tax return electronically through the FTA’s portal before the due date. Late submissions can trigger penalties even if no tax is payable.

    5. Pay the Tax Due

    If your business owes corporate tax, make sure the payment is made before the deadline. Delayed payments result in interest charges and additional fines.

    How to File a Corporate Tax Return in the UAE?

    Filing a corporate tax return in the UAE is done online through the Federal Tax Authority (FTA) portal. Here’s how it works:

    1. Register for Corporate Tax

    First, make sure your business is registered with the FTA for corporate tax. Once approved, you’ll receive a Corporate Tax Registration Number (TRN) that you’ll use for filing.

    2. Log in to the FTA Portal

    Go to the FTA e-Services portal using your registered account. Select the option for Corporate Tax to start your filing process.

    3. Prepare Your Financial Information

    Gather your audited financial statements and supporting records. Calculate your taxable income after applying exemptions or reliefs (like the AED 375,000 profit threshold at 0% tax).

    4. Fill Out the Corporate Tax Return Form

    Enter details such as income, expenses, adjustments, and exemptions. Double-check that the numbers match your financial statements.

    5. Review and Submit

    Carefully review the form to avoid errors. Submit the return electronically before the deadline.

    6. Pay Any Tax Due

    If your return shows tax payable, you must make the payment through the FTA’s system before the due date. You can pay via bank transfer, e-dirham, or other FTA-approved methods.

    7. Keep Records Safe

    The FTA requires businesses to keep their records for at least seven years. These may be requested during audits or inspections.

    What are the Penalties for Late Filing or Non-Compliance?

    Missing the corporate tax deadline can lead to serious consequences, including significant penalties and fines.

    1. Late Filing of Corporate Tax Returns:

    After the filing deadline, the FTA charges monthly fines:

    • AED 500 per month (or part of a month) for the first 12 months.
    • AED 1,000 per month from the 13th month onwards (continuing until you file the return).

    2. Late Registration Penalty:

    Businesses that fail to register for corporate tax within the specified deadlines can face a penalty of AED 10,000. However, the FTA has offered a temporary waiver for this penalty. To qualify, a business must file its first corporate tax return or annual declaration within seven months from the end of its first tax period.

    How Shuraa Tax Can Help Businesses

    The 2026 corporate tax deadline is very important for every business in the UAE. Filing on time helps you avoid fines, extra charges, and unnecessary stress. It also shows that your company is responsible and fully compliant with the Federal Tax Authority.

    With Shuraa Tax, you don’t have to worry about the process. Our team helps with everything – from corporate tax registration to filing returns correctly and on time. We also offer full advisory support, including help with penalty waivers if you’ve missed something in the past.

    Instead of stressing over rules and deadlines, let Shuraa Tax handle it for you. Get in touch with us today and make your corporate tax journey smooth and hassle-free.

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

    Frequently Asked Questions

    1. What is the UAE corporate tax deadline for 2026?

    The deadline depends on your company’s financial year. If your year ends 31 December 2024, the filing deadline is 30 September 2026. If your year ends 31 March 2026, the filing deadline is 31 December 2026.

    2. How do I register for corporate tax in the UAE?

    You can register online through the FTA’s EmaraTax portal. Once approved, you’ll receive a Corporate Tax Registration Number (TRN).

    3. Do free zone companies also need to file corporate tax returns?

    Yes. Even if you qualify for a 0% rate as a free zone business, you are still required to register and file a corporate tax return on time.

    4. What is the corporate tax registration deadline in the UAE?

    The registration deadline varies based on your company’s license issuance date. The FA has issued specific schedules for different entity types. Generally, if you’re a UAE resident juridical person, your deadline is tied to the month your trade license was issued. For entities established on or after March 1, 2024, the deadline is within three months of their establishment.

    5. What happens if I miss the 2026 tax deadline?

    Missing the deadline can lead to fines, monthly penalties, and interest on unpaid taxes. It may also trigger FTA audits.

  • Common VAT Filing Mistakes in the UAE

    Common VAT Filing Mistakes in the UAE

    VAT (Value Added Tax) has been part of doing business in the UAE since 2018, with a standard rate of 5%. If your business is registered for VAT, you’re required to file VAT returns regularly, and it’s important to do it correctly.

    Filing your VAT accurately isn’t just a formality. Even small mistakes can lead to penalties, fines, or trigger an audit from the Federal Tax Authority (FTA). And let’s face it – no one wants that kind of stress.

    Therefore, here are some of the most common VAT filing mistakes businesses make in the UAE, and more importantly, how you can avoid them and stay on the safe side.

    1. Missing VAT Filing Deadlines

    Many businesses in the UAE get caught up in daily operations and forget one crucial task – filing their VAT return on time. The Federal Tax Authority (FTA) requires registered businesses to file their VAT returns either monthly or quarterly, depending on the tax period assigned to them. If you miss the deadline, you could face a penalty of AED 1,000 for the first late submission and AED 2,000 for each repeat offence within 24 months.

    Late payments are treated separately and come with a 2% immediate penalty, followed by 4% after 7 days, and a 1% daily penalty thereafter (up to 300%).

    How to avoid it:

    • Mark your VAT filing dates clearly on a calendar.
    • Set digital reminders (email, phone, or task managers).
    • Consider hiring a registered tax agent or consultant, such as Shuraa Tax, who can handle timely submissions for you and ensure compliance.

    2. Incorrect Input Tax Claims

    Claiming VAT on business expenses is a common practice, but only if done correctly. Some businesses mistakenly claim input tax on non-recoverable expenses, such as:

    • Business entertainment (meals, events)
    • Personal expenses
    • Passenger vehicles used for personal and business purposes
    • Gifts or employee benefits not directly linked to taxable supplies

    Making incorrect claims can lead to denied refunds, adjustments by the FTA, or even financial penalties for misreporting.

    How to avoid it:

    • Understand the FTA’s rules on recoverable vs non-recoverable VAT.
    • Keep valid tax invoices and receipts for every claim.
    • Maintain clear records linking the expense to your taxable activities.
    • When in doubt, ask a tax expert to review your input VAT claims before filing.

    3. Not Charging VAT Where Applicable

    Some businesses either forget or incorrectly assume that they don’t need to charge VAT on certain products or services. This often happens when they confuse zero-rated, exempt, and standard-rated supplies. For instance:

    • Zero-rated items (like exports and certain educational/healthcare services) are taxable but at 0%.
    • Exempt items (like local public transport and some financial services) are outside the scope of VAT.
    • Standard-rated goods and services must be charged at 5% VAT.

    Failing to charge VAT on a standard-rated supply can result in an administrative penalty for submitting an incorrect tax return, which is AED 3,000 for the first time and AED 5,000 for repeated offenses. In addition, the business will be required to pay the uncharged tax to the FTA.

    How to avoid it:

    • Carefully check the VAT classification of every product or service you offer.
    • Use accounting software that applies VAT correctly.
    • Stay updated with FTA guidelines or consult a registered tax agent to ensure full compliance.

    4. Errors in VAT Return Forms

    Filling out the VAT return form (Form 201) correctly is essential. Businesses often make mistakes by misplacing figures in the wrong boxes, such as reporting sales for one Emirate in another’s box, or not reporting zero-rated and exempt supplies at all. Even if these errors don’t impact the final tax amount, they are considered non-compliant and can lead to penalties.

    Some businesses also forget to include adjustments, such as bad debt relief, credit notes, or reverse charge entries.

    How to avoid it:

    • Review the VAT return form thoroughly before submission.
    • Keep a summary sheet of all sales, purchases, and adjustments for the period.
    • If you’re not confident, let a registered tax consultant handle the filing to ensure accuracy.

    5. Wrong VAT Calculations

    Getting your VAT numbers wrong is more common than you might think—and it can have serious consequences. Some businesses mistakenly calculate VAT on the wrong base amount or apply the wrong rate. Others may misinterpret the difference between VAT-inclusive and VAT-exclusive pricing, leading to underreporting or overcharging customers.

    For example, if a product is priced at AED 1,000 inclusive of VAT, the VAT amount is AED 47.62 (not AED 50). Miscalculating this can affect both your VAT liability and your customer’s invoice.

    How to avoid it:

    • Double-check your pricing models, and know if prices are inclusive or exclusive of VAT.
    • Use FTA-approved accounting or invoicing software that calculates VAT automatically.
    • Reconcile your books regularly to ensure your VAT figures match your actual sales and purchases.

    6. Not Maintaining Proper Records

    The FTA requires businesses to keep VAT-related records for at least 5 years. This includes:

    • Tax invoices and receipts
    • Credit and debit notes
    • Import and export documents
    • Accounting books and ledgers
    • Records of exempt and zero-rated supplies

    Failing to maintain these documents properly or losing them can be problematic during audits or refund claims. The penalties for failing to keep proper records are significant is AED 10,000 for the first offence and AED 50,000 for a repeated violation within 24 months.

    How to avoid it:

    • Store both physical and digital copies of all VAT-related records.
    • Organise records by filing period for easier access.
    • Use cloud-based software or an accounting system with secure backups.
    • Conduct periodic internal audits to ensure all required documents are in place.

    7. Ignoring the Reverse Charge Mechanism (RCM)

    Many businesses in the UAE overlook the Reverse Charge Mechanism (RCM), especially when dealing with imported goods or services. Under RCM, the buyer (not the supplier) is responsible for reporting and paying VAT to the Federal Tax Authority (FTA). This applies when you purchase from foreign suppliers who are not registered for VAT in the UAE.

    If you don’t report these transactions correctly, the FTA may see it as underreporting your VAT liability, which can lead to penalties and interest charges.

    Example: If your business imports software services from a company in the UK, you must declare and pay VAT on that purchase under RCM, even if the UK supplier hasn’t charged you VAT.

    How to avoid it:

    • Understand which of your transactions are subject to RCM (commonly imports of services or goods).
    • Declare both the input and output VAT in your return under RCM (they usually cancel each other out if the input tax is recoverable).
    • Seek advice from a tax consultant if you deal frequently with international suppliers.

    8. Incorrect VAT Registration or Deregistration

    Another common pitfall is not registering for VAT when required—or failing to deregister when you’re supposed to. Businesses must register for VAT if their taxable turnover exceeds AED 375,000 in the last 12 months. Some businesses delay registration, thinking they’ll “wait a bit,” but this delay can result in late registration penalties of AED 10,000.

    On the other hand, if your business is no longer eligible for VAT (e.g., your taxable turnover drops below the threshold), you must apply for deregistration within 20 business days. Failing to do so can also lead to fines.

    How to avoid it:

    • Monitor your turnover regularly to know when to register or deregister.
    • Don’t assume you can delay action; deadlines are strictly enforced by the FTA.
    • Work with a VAT consultant to ensure proper registration and timely deregistration.

    9. Treating Zero-Rated and Exempt Supplies as the Same

    Many businesses confuse zero-rated supplies with exempt supplies, but they are not the same, and treating them alike on your VAT return can lead to misreporting.

    • Zero-rated supplies (like exports, certain healthcare and education services) are taxable at 0%, and you can still claim input VAT on related purchases.
    • Exempt supplies (like life insurance, residential rentals, and local passenger transport) are not taxable, and you cannot claim input VAT on related expenses.

    Mixing these up may result in wrong VAT calculations and incorrect input VAT claims, which could trigger an audit or penalties from the FTA.

    How to avoid it:

    • Know the difference between zero-rated and exempt supplies as per UAE VAT law.
    • Train your accounting team or consult with a VAT expert for correct classification.
    • Review your business activities periodically to ensure accurate reporting.

    10. Failure to Issue a Valid Tax Invoice

    A tax invoice is more than just a receipt, it’s a critical legal document. It must contain specific, mandatory information to be considered valid under FTA regulations. This includes:

    • The words “Tax Invoice” clearly displayed.
    • Your business’s name, address, and Tax Registration Number (TRN).
    • The customer’s details and TRN (if applicable).
    • A clear description of the goods or services.
    • The total amount of the supply, the VAT amount, and the VAT rate.

    Failing to issue a valid tax invoice or credit note can lead to a penalty of AED 2,500 per missing or incorrect document. This also prevents your customers from being able to reclaim input VAT, which can harm business relationships.

    How to avoid it:

    • Ensure that every invoice and credit note template your business uses is fully compliant with FTA regulations.
    • Employ accounting or invoicing software that automatically populates the required fields, reducing the risk of human error.

    How Shuraa Tax Can Help

    Making VAT filing mistakes can cost your business time, money, and peace of mind. But the good news is, most of these errors are easy to avoid once you know what to look out for. Staying on top of your VAT returns and keeping things accurate helps you avoid penalties and keeps your business running smoothly.

    If VAT still feels confusing or time-consuming, don’t worry – Shuraa Tax is here to help. Our team can take care of everything, from VAT registration and VAT filing to audits and expert advice. We offer simple, stress-free VAT solutions for startups, small businesses, and large companies too.

    Need help with VAT in the UAE? Contact Shuraa Tax for a free consultation today. We’ll make sure you’re fully compliant and worry-free.

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

  • Crypto Taxes in Dubai: Are Digital Assets Really Tax-Free?

    Crypto Taxes in Dubai: Are Digital Assets Really Tax-Free?

    Cryptocurrency has been gaining popularity all over the world, and Dubai is no exception. From buying property and booking flights to investing in new-age businesses, people in the UAE are using crypto more than ever. And it’s not just individuals. Big companies and even the government are taking steps to make Dubai a global hub for digital assets.

    With dedicated zones like DMCC and DIFC welcoming crypto firms, and a special regulator (VARA) to manage virtual assets, Dubai is clearly serious about becoming a leader in this space. But with all this growth and support, one big question still comes up: Dubai Crypto Tax. Is crypto really tax-free here, or are there hidden conditions that investors and businesses should know about?

    That’s what we’re here to explore.

    Overview of Crypto Landscape in Dubai

    Dubai sees crypto as an opportunity rather than a threat. It’s working hard to create a safe and supportive environment for crypto investors, startups, and global companies. Doesn’t matter if you’re an individual looking to trade Bitcoin or a business planning to launch a blockchain-based platform, Dubai has made it easier to operate legally and confidently.

    Is Crypto Legal in Dubai?

    Yes, crypto is legal in Dubai. You can own, buy, sell, and trade cryptocurrencies like Bitcoin and Ethereum. Crypto mining is also allowed, though it must be done within regulatory boundaries and with the right approvals. However, using crypto as a regular currency (like to pay for everyday things) is still limited, though it’s gradually becoming more accepted in areas like real estate and travel.

    The Role of VARA

    A big part of this framework is VARA, the Virtual Assets Regulatory Authority. Established in 2022, VARA is the world’s first independent regulator specifically set up for virtual assets. It oversees licensing, compliance, and operations for crypto-related businesses in Dubai (outside the financial free zones).

    VARA’s main goal is to protect investors while encouraging innovation in the virtual asset space. So, if you’re starting a crypto exchange, offering NFTs, or managing digital wallets, you’ll need to register with VARA.

    Is Crypto Tax-Free in Dubai?

    Dubai doesn’t impose personal income tax (or capital gains tax) on crypto profits earned by individuals. So, if you buy, sell, or trade crypto for personal investment, your gains are entirely tax‑free. That applies even to income from staking or mining, as long as it’s on a personal level, not part of a registered business.

    What It Means for Individuals Trading Crypto?

    If you’re simply holding or trading crypto for your own investment, you don’t owe any tax to the UAE. You won’t need to file or pay taxes on those profits. However, if you live in Dubai but are a tax resident elsewhere, you might still have to report these gains to your home country’s tax authority (e.g., U.S. citizens reporting to the IRS).

    When Does Crypto Become Taxable in Dubai, UAE?

    While individual crypto investors enjoy tax-free gains in Dubai, there are certain situations where crypto becomes taxable, especially when it’s tied to business activity. Here’s when Dubai crypto tax applies:

    1. When You’re Running a Business Using Crypto

    If you’re using crypto as part of your business operations, your income may be subject to 9% corporate tax if your net profit exceeds AED 375,000 annually.

    • Taxable Crypto Business Activities Include:
    • Running a crypto exchange
    • Operating a mining business
    • Providing staking-as-a-service
    • Offering crypto trading or advisory services
    • Receiving crypto payments for goods/services as a registered business
    • Earning regular profits from active trading as a company

    In these cases, crypto earnings are considered business income, not personal investment, making them taxable under the UAE Corporate Tax Law.

    2. If You’re a Freelance Crypto Trader Acting Like a Business

    Even if you’re not incorporated, but you’re trading crypto frequently and systematically, authorities may view this as self-employment or business activity. If so:

    • You may need to register a trade license
    • Profits may fall under corporate tax scope once you formalise or exceed thresholds

    3. If You’re in a Free Zone but Non-Qualifying

    Some Dubai Free Zones (like DMCC, DIFC, DWTC) offer tax exemptions, but only to qualifying activities and entities. If your crypto activity doesn’t qualify, you may still be liable for:

    • Corporate tax
    • VAT (5%) on applicable services

    4. Commercial Mining vs. Personal Mining

    Personal mining (hobby-level activity) remains untaxed. But if mining is conducted on a commercial scale, it’s treated as a business activity, subject to corporate tax and potentially VAT.

    5. NFTs & Digital Asset Services

    Buying/selling NFTs as an individual is tax-free. But if you’re a studio or business minting and selling NFTs, that income counts as corporate profit and may be taxed under the 9% rule, and VAT could apply too.

    In short, individuals trading, holding, mining, or collecting NFTs for personal use remain tax-free, with no corporate tax, no VAT. Once your crypto activity counts as a business, especially with revenues over AED 375,000, you enter the realm of corporate tax (9%) and possibly VAT (5%), depending on the service.

    Does Dubai Offer Any Crypto-Friendly Zones?

    Yes, Dubai is home to multiple crypto-friendly free zones that cater to startups, investors, and enterprises in the virtual assets space.

    1. Dubai Multi Commodities Centre (DMCC) – Crypto Centre

    DMCC launched its Crypto Centre to support blockchain and crypto innovation. The freezone offers licenses for crypto trading, blockchain development, and more. Partners with global firms like Binance to boost infrastructure. 0% personal income tax, and businesses may benefit from 0% corporate tax if they qualify under the UAE’s Free Zone rules.

    2. IFZA (International Free Zone Authority)

    IFZA is growing as a crypto-friendly zone offering flexible company setups. It supports blockchain-based service providers and technology firms. Cost-effective and suitable for smaller businesses or consultants in the digital asset space.

    3. Dubai World Trade Centre (DWTC)

    In 2021, DWTC was designated as a special crypto zone focused on virtual assets. The freezone works closely with VARA to issue licenses for exchanges, custodians, and blockchain platforms. It is ideal for large-scale exchanges and token projects seeking credibility and compliance.

    4. Dubai International Financial Centre (DIFC)

    DIFC is a leading financial free zone with its own independent legal framework. Home to FinTech and blockchain companies regulated by the DFSA (Dubai Financial Services Authority). Suitable for firms offering crypto investment services, tokenised assets, and financial products.

    Why Do Crypto People Move to Dubai?

    Dubai is a popular place for crypto enthusiasts, traders, entrepreneurs, and blockchain companies from around the world, and for good reason. Here’s why:

    1. Zero Personal Income Tax

    Dubai doesn’t tax individuals on their income or capital gains, including crypto gains. That means if you trade or invest in crypto personally, your profits are 100% tax-free.

    2. Crypto-Friendly Regulations

    Dubai was one of the first cities to establish a dedicated crypto regulator – VARA (Virtual Assets Regulatory Authority). This gives crypto businesses a clear and legal framework to operate in, with proper licensing and compliance rules.

    3. Escape from Regulatory Crackdowns

    In the US, UK, India, and other regions, governments are tightening crypto laws or even banning certain activities. Dubai offers a safe and stable environment where crypto isn’t seen as a threat, but as a tech opportunity.

    4. Affordable Compared to Other Crypto Hubs

    Places like London, Singapore, or New York can be very expensive to live and run a business. Dubai offers zero income tax, zero capital gains tax, and relatively lower operational costs for setting up your company.

    5. High Digital Acceptance

    Crypto isn’t just tolerated, it’s being adopted. You can buy real estate with crypto, book flights, and pay for services. There’s even growing infrastructure for Web3 payments, wallets, and DeFi use cases.

    Want to Stay Tax-Free? Shuraa Tax Can Help

    So, is crypto really tax-free in Dubai? Yes, for personal investors, it mostly is. You don’t pay tax on your trading or investment profits if it’s for personal use. But if you’re running a crypto business or offering related services, some taxes like corporate tax or VAT can apply.

    As Dubai becomes a global hotspot for crypto, it’s important to understand the rules and stay on the safe side. The last thing you want is to run into tax trouble just because you weren’t aware of the laws.

    If you’re unsure where you stand, don’t worry – Shuraa Tax can help. Whether you’re an individual investor or a business owner, our team is here to guide you on Dubai crypto tax, corporate tax, VAT, and more. Reach out to us for expert advice and make your crypto journey in Dubai stress-free and compliant.

    Commonly Asked Questions

    1. Is there any personal income tax on crypto gains in Dubai?

    No, Dubai does not impose personal income tax, so individuals don’t pay tax on profits from trading or holding cryptocurrency.

    2. Are crypto services subject to VAT in the UAE?

    Not all. Most crypto transactions are VAT-exempt, but some crypto-related services like mining, wallet management, or consultancy may attract VAT at 5%.

    3. Is mining crypto taxable in Dubai?

    Personal mining is not taxed. But if you mine on a commercial scale, it may be considered a business and subject to corporate tax and possibly VAT.

    4. Can foreigners set up a crypto business in Dubai?

    Yes, foreigners can fully own and operate crypto businesses in Dubai, especially through designated free zones with crypto-friendly policies.

    5. Are NFTs (Non-Fungible Tokens) taxed in Dubai?

    Buying or selling NFTs personally is not taxed. However, if you’re running an NFT business or creating them commercially, corporate tax and VAT may apply.

    6. How can Shuraa Tax help with crypto tax in Dubai?

    Shuraa Tax provides expert guidance on crypto taxation, business licensing, VAT compliance, and helps individuals and companies stay fully compliant with UAE laws.

  • Qualifying Free Zone Person Under UAE’s Corporate Tax Law

    Qualifying Free Zone Person Under UAE’s Corporate Tax Law

    The UAE rolled out its first-ever Corporate Tax law in June 2023, marking a big shift in how businesses are taxed across the country. Under this new law, companies are taxed at 0% on profits up to AED 375,000, and 9% on profits above that amount. But if you’re a business based in a Free Zone, there’s a chance you can still benefit from a 0% tax rate—if you qualify as a “Qualifying Free Zone Person” (QFZP).

    So, what exactly is a Qualifying Free Zone Person in UAE? It’s a Free Zone company that meets certain conditions, like doing the right kind of business activities, keeping proper offices and operations in the UAE, and following rules on how they deal with related companies. If a Free Zone business ticks all these boxes, it can continue to benefit from zero corporate tax on its qualifying income.

    Being a QFZP is a major advantage for businesses in Free Zones, but it comes with strict compliance requirements. If a company fails to meet any of the conditions, it could lose its 0% tax benefit, not just for the current year, but for the next five years as well.

    So, let’s understand what it means to be a Qualifying Free Zone Person under UAE corporate tax, what type of income qualifies, and what you need to do to make sure your Free Zone business stays compliant and tax-efficient under the UAE’s Corporate Tax Law.

    What Is a Free Zone in the UAE?

    A Free Zone (also known as a Free Trade Zone) is a specially designated area within the UAE where businesses can operate with favourable rules and incentives. These zones were created to encourage international investment and make it easier for foreign companies to set up and grow their businesses in the UAE.

    Here are some of the well-known Free Zones where thousands of businesses are successfully operating:

    • IFZA (International Free Zone Authority)
    • Ajman Free Zone
    • RAKEZ (Ras Al Khaimah Economic Zone)
    • DWTC (Dubai World Trade Centre)

    When it comes to taxes, Free Zones have traditionally provided 0% corporate and personal income tax, making them highly attractive. Under the new UAE Corporate Tax Law, businesses in Free Zones can still enjoy a 0% tax rate, but only if they qualify as a Qualifying Free Zone Person (QFZP).

    Who Is a Qualifying Free Zone Person in UAE?

    UAE CT Law – Article 18: A Qualifying Free Zone Person is a legal entity (or branch) that is incorporated or registered in a UAE Free Zone and meets specific requirements set by the law. When these conditions are satisfied, the entity enjoys a 0% corporate tax rate on its qualifying income, while non-qualifying income is taxed at 9%.

    To benefit from the 0% tax rate, a Free Zone Person must fully meet all of the following conditions:

    1. Registered in a UAE Free Zone

    The entity must be legally set up in a designated Free Zone, including branches of non-resident or UAE-resident companies.

    2. Maintain Adequate Economic Substance

    • Conduct its core income‑generating activities (CIGAs) within the Free Zone.
    • Have sufficient assets, qualified employees, and reasonable operating expenditure located there.
    • Outsourcing is allowed only to related or third‑party entities within a Free Zone, with proper oversight.

    3. Earn Qualifying Income

    This includes: 

    • Income from transactions with other Free Zone Persons (that aren’t excluded).
    • Income from qualifying activities performed with non-Free Zone parties (not excluded).
    • Income from holding or exploiting IP, and other income that respects the de‑minimis threshold (≤ AED 5 million or ≤ 5% of total revenue).

    4. No Election to Standard Tax Regime

    The entity must not opt into the standard 9% tax across the board.

    5. Comply with Transfer Pricing Rules

    All related-party transactions must follow the arm’s length principle, with full documentation per Articles 34 and 55.

    6. Prepare Audited Financial Statements

    Annual financials must be audited and compliant with IFRS (or comparable standards).

    7. Stay Below the De-minimis Threshold for Non-Qualifying Income

    Non-qualifying income must not exceed the lesser of AED 5 million or 5% of total income. Exceeding this disqualifies QFZP status for the year and triggers a 4-year cooling-off.

    What Happens If You Don’t Qualify?

    If any of these criteria aren’t met, or if the entity opts for the standard regime, it will lose QFZP status. The result:

    • The entire taxable income is subject to 9% CT (post AED 375k threshold).
    • The disqualification lasts for the current tax year + the next four years.

    What is Qualifying Income for QFZP in UAE?

    Under the Cabinet Decision No. 55 (2023) and Ministerial Decision No. 139 (2023), a Qualifying Free Zone Person (QFZP) must earn income from specific sources to maintain the 0% tax rate:

    1. Income from transactions with other Free Zone Persons

    Profits or service fees from dealings with other free zone entities count as qualifying income, as long as they don’t stem from “excluded activities.”

    2. Income from QUALIFYING Activities with non–Free Zone entities

    Revenue from specific activities conducted with mainland UAE companies or overseas clients qualifies, but only if the activities are on the approved list and not “excluded.”

    Common qualifying activities include: 

    • Manufacturing or processing goods
    • Holding shares and securities
    • Operating ships or logistics services
    • Fund, wealth, investment management, reinsurance
    • Headquarter, treasury, aircraft leasing services

    3. Passive or incidental income (de‑minimis rule)

    Other income (like dividends, capital gains, royalties) may qualify if non-qualifying income stays below the de‑minimis threshold: ≤ AED 5 million or ≤ 5% of total revenue, whichever is lower.

    4. Incidental income tied to qualifying activities

    Minor additional income linked to qualified Free Zone or non‑Free Zone transactions may also qualify.

    What Activities Considered as Qualifying vs Non-Qualifying in the UAE?

    Here’s a quick look at which activities are considered qualifying and which ones are excluded under UAE law.

    1. Qualifying Activities

    According to Ministerial Decision No. 139 of 2023, these activities, and any direct ancillary activities, are considered qualifying:

    • Manufacturing or processing goods/materials
    • Holding shares or securities (for investment)
    • Operating and managing ships in international transportation
    • Financing/leasing aircraft, incl. engines and components
    • Treasury and financing services to related parties
    • Headquarter services provided to related parties
    • Fund, wealth, and investment management, regulated
    • Reinsurance services, regulated
    • Logistics services
    • Distribution of goods/materials in or from a Designated Zone

    Ancillary activities like storage, packaging, or installation related to the above are also qualifying.

    2. Non‑Qualifying (Excluded) Activities

    These are excluded activities and any income from them is non-qualifying:

    • Transactions with natural persons, unless part of allowed activities (e.g., ship operation, aircraft leasing, fund/wealth management)
    • Banking, insurance, finance/leasing services (unless specific exceptions apply like reinsurance or related-party financing)
    • Ownership or exploitation of immovable property, except commercial property within Free Zones sold/leased to other FZPs
    • Intellectual property income (unless specially qualifying)
    • Ancillary services for excluded activities (e.g. maintenance of property)

    Also, any income from a mainland or foreign permanent establishment (branch) of the QFZP is taxed separately at 9% and not treated as qualifying income.

    What is the Registration & Filing Requirements for QFZPs?

    Corporate tax registration is mandatory for all Free Zone entities, regardless of revenue, including QFZPs. You need to register via the FTA’s EmaraTax portal and obtain a Tax Registration Number (TRN).

    Deadline: 

    • If incorporated after March 1, 2025: within 90 days of incorporation
    • For those incorporated before March 1, 2025: deadlines vary, typically 3 months from license date, e.g., a March license requires registration by June 30, 2024

    Tax Return & Disclosure Obligations:

    Annual return filing is required within 9 months of fiscal year-end, even if no tax is payable (nil return). Additional disclosure requirements include:

    • Segregated qualifying vs non-qualifying income
    • Statement of average full-time employees, operating expenses, economic substance, and outsourced activities (including provider TRNs)
    • Audited financial statements, regardless of revenue, under IFRS
    • Transfer pricing documentation and disclosures, including master/local files if threshold met

    Remember to maintain all relevant records and supporting documents, such as financials, audits, TP files, substance documentation, for a minimum of 7 years.

    Failing to register, file, audit, disclose, or maintain substance/TP records can cause loss of qualifying free zone person in UAE status, meaning your qualifying income becomes taxable at 9% and the loss persists for 5 years.

    How Shuraa Tax Can Help?

    Being a qualifying free zone person in UAE can give your business a big advantage, mainly the 0% corporate tax on certain types of income. But to keep this benefit, your Free Zone company must follow specific rules set by the UAE government.

    From meeting certain requirements to keeping proper records, filing tax returns on time, and following transfer pricing rules, it can get a bit tricky. If these conditions aren’t met, your business may lose its QFZP status and end up paying 9% corporate tax for five years.

    That’s why it’s always a smart move to get expert help. At Shuraa Tax, we help Free Zone companies:

    • Check if they qualify as a QFZP
    • Corporate tax registration
    • Corporate tax filing
    • Transfer Pricing documentation and compliance
    • Stay fully compliant and avoid penalties

    If you’re unsure where your Free Zone business stands or need help managing tax rules, get in touch with Shuraa Tax today.

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

    Frequently Asked Questions

    1. Who is a Qualifying Free Zone Person under UAE Corporate Tax?

    A Qualifying Free Zone Person (QFZP) is a legal entity set up in a UAE Free Zone that meets certain conditions:

    • Maintains adequate economic substance in the Zone
    • Earns qualifying income (e.g., from Free Zone deals or approved activities)
    • Adheres to transfer pricing rules and documentation
    • Prepares audited financial statements
    • Keeps non-qualifying income below AED 5 million or 5% of total revenue
    • Doesn’t opt into the standard 9% CT regime

    2. Do all Free Zone companies automatically qualify for 0% tax?

    No. A Free Zone Person is considered a QFZP unless it fails to meet any conditions or elects into the 9% standard CT regime.

    3. Is corporate tax registration mandatory for QFZPs in the UAE?

    Yes, all Free Zone Persons, including QFZPs, must register with the FTA via EmaraTax, even if no tax is due.

    4. What happens if a Qualifying free zone person in UAE loses its status?

    If a QFZP fails to meet the rules or opts into the standard regime, it loses its 0% tax benefit and is subject to 9% tax on all income for that year and the next four years.

  • VAT On Services Provided Outside UAE

    VAT On Services Provided Outside UAE

    Since VAT (Value Added Tax) was introduced in the UAE in 2018, most businesses have been charging a standard 5% on goods and services sold within the country. But what happens when your business provides services to clients who are outside the UAE? Do you still need to charge VAT?

    The answer isn’t always straightforward. It depends on something called the “place of supply”, a key rule that helps determine whether your service is taxed in the UAE or not. In many cases, if you’re dealing with customers located outside the UAE, your services might be zero-rated (charged at 0% VAT) or completely outside the VAT scope, meaning no VAT applies.

    That’s why understanding how VAT on services provided outside UAE works is really important for staying compliant and avoiding unnecessary taxes or fines.

    What Is VAT and How Does It Apply in the UAE?

    VAT stands for Value Added Tax, a consumption tax charged at each stage of the supply chain from production to sale. Although businesses collect and pay it to the government, the final cost is ultimately borne by the end consumer.

    VAT was introduced in the UAE on January 1, 2018, with a standard rate of 5% on most goods and services.

    However, certain supplies fall into special categories:

    • Zero-rated (0%): Usually exports, international transport, and specific sectors like education and healthcare
    • Exempt: Includes things like financial services, sale or lease of residential properties, bare land, and local passenger transport

    A zero-rated supply lets you recover input VAT, while an exempt supply does not; you can’t claim back VAT on inputs.

    Domestic vs International Supply of Services

    Domestic supplies (services within UAE boundaries) are taxed at 5%.

    International supplies, like services for clients outside the UAE, may be zero-rated or outside the scope of VAT, depending on the “place of supply” rules.

    For zero-rated international services, you won’t charge VAT, but you can still reclaim input VAT on related business costs.

    Understanding ‘Place of Supply’ for Services

    The place of supply is the country where a service is considered to have been supplied for VAT purposes. This determines whether VAT should be charged, and at what rate. In the UAE, the default rule is based on the supplier’s location.

    Under Article 29 of Federal Decree-Law No. 8/2017, the place of supply for services is generally the supplier’s place of residence, meaning where your business is based.

    Special Rules: Article 30 Exceptions

    However, several special cases under Article 30 override the default:

    • B2B services to a non‑UAE VAT‑registered business: The place of supply is the recipient’s country.
    • Services related to goods (e.g., installation): The place of supply is where the service is performed.
    • Leasing transport to a non‑VAT lessee: Place of supply is where the asset is delivered.
    • Hotel, restaurant, catering: Place of supply is where the service is physically provided.
    • Cultural, artistic, sporting, and educational services: Place of supply is where the event occurs.
    • Real estate services: Place of supply is where the property is located.
    • Transport services: Place of supply is where the journey starts.
    • Telecom and electronic services: Place of supply is where the service is used or enjoyed.

    If the place of supply is inside the UAE, you must charge VAT at 5%. If the place of supply is outside the UAE, the service is zero-rated or out-of-scope, and you don’t charge VAT.

    Applying the correct rule ensures you avoid unnecessary VAT charges, possible penalties, or missed claims.

    VAT on Services Provided Outside UAE

    If your business provides services to clients outside the UAE, these services may fall into one of two categories:

    1. Zero-rated (also known as 0% VAT): You don’t charge VAT, but you can claim back VAT paid on related expenses.
    2. Out-of-scope: These services don’t count as VAT supplies—they aren’t reported in VAT returns, and you can’t claim input VAT.

    A. Zero-Rated Services

    Zero-rated services are those considered exports under UAE VAT law. According to Article 31 of the Executive Regulation:

    • The service must be provided to a client whose place of residence is outside the UAE (or, alternatively, performed entirely outside the UAE), and
    • It cannot involve real estate or movable property located in the UAE

    Furthermore, if a service is actually performed overseas, that alone can qualify it as zero-rated, even if the client is a UAE resident, so long as the recipient doesn’t use the service in the UAE.

    Common examples:

    • Consulting UK clients from Dubai.
    • Legal advice, design work, or training delivered entirely outside the UAE.
    • IT support provided remotely to clients abroad.

    B. Out-of-Scope Services

    Out-of-scope services are never subject to VAT in the UAE, and they don’t feature on VAT returns. These include:

    • Services provided by a business fully located outside the UAE to clients also outside the UAE
    • Electronic services supplied overseas where both supplier and recipient are non-UAE entities

    Example scenarios:

    • A UK-based marketing firm serving only UK clients.
    • A freelance graphic designer in India working solely for Indian companies.

    When UAE Businesses Don’t Charge VAT

    You do not charge VAT in these situations:

    Your service is zero-rated:

    • Provided to overseas clients.
    • Or completely performed outside the UAE.
    • And not tied to UAE property or assets.

    Your service is out-of-scope:

    • Your business and clients are both outside the UAE.
    • Services are entirely beyond the UAE’s VAT jurisdiction.

    What are the Key Conditions for Zero-Rating Services?

    To apply 0% VAT on services provided to clients outside the UAE, the following conditions must be met:

    1. Client Must Be Outside the UAE

    The client must not have a place of residence in the UAE—no head office or fixed establishment there. If multiple establishments exist, the one most closely tied to the service is considered. The client must be physically outside the UAE at the time the service is performed. A short visit (under 30 days) that isn’t connected to the service doesn’t affect this.

    2. No Link to UAE Real Estate or Goods

    The service must not be directly connected to real estate or physical goods located in the UAE.

    3. No Business Presence in UAE

    The recipient should not have a branch, office, or other business setup in the UAE that is related to the service.

    4. Proper Documentation Required

    You must keep documents like:

    • Client’s business license or proof of address outside the UAE
    • Contracts showing the recipient and the nature of service
    • Evidence of where the client was when the service was delivered

    Special Cases & Exceptions

    While many services provided to clients outside the UAE can be zero-rated, there are some exceptions where UAE VAT still applies, even if the customer is based overseas.

    1. Services Related to UAE Real Estate

    Any service directly tied to UAE property, such as property management, leasing rights, construction, or real estate agency work, is treated as supplied in the UAE, regardless of your client’s location. You must charge 5% VAT.

    2. Services Connected to Events Held in the UAE

    Services for cultural, artistic, sporting, educational, or entertainment events take place where the event occurs. If the event is in the UAE, even if the client is abroad, you must add 5% VAT.

    3. Services Rendered to Non‑Residents but Used in the UAE

    If you provide services to a non-resident that are used or enjoyed in the UAE, the place of supply shifts to the UAE. For example:

    • UAE-based web hosting serving UAE customers, even for an overseas business.
    • On-ground installation or customisation of goods in the UAE for a foreign client.

    In these cases, you must charge VAT at 5%, even if your service is technically for a non-resident.

    Need Help with VAT? Let Shuraa Tax Guide You

    To sum it up, if you’re offering services to clients outside the UAE, it’s important to understand how VAT works. Knowing when to apply 0% VAT, when it’s out of scope, or when standard VAT still applies can save you from costly mistakes. Make sure to review your service contracts, client details, and VAT setup regularly.

    And if it feels confusing, don’t worry, Shuraa Tax is here to help. Our VAT experts can guide you through the rules, help with proper documentation, and even handle your VAT returns. We make VAT easy, so you can focus on running your business.

  • UAE Expands Corporate Tax Exemption to Certain Foreign-Owned Entities

    UAE Expands Corporate Tax Exemption to Certain Foreign-Owned Entities

    The UAE continues to take bold steps in strengthening its position as a global investment hub. In a significant update, the Ministry of Finance (MoF) has announced an extension of the corporate tax exemption policy, this time including foreign-owned entities under specific conditions. The move aims to ensure fairness in tax treatment between local and foreign entities linked to certain exempt owners.

    Let’s break down what this update means, who it benefits, and how businesses can make the most of it.

    What’s New?

    Previously: 

    Foreign entities, even if fully owned by UAE government entities, sovereign funds, or other tax-exempt institutions, were not eligible for corporate tax exemption simply because they were incorporated outside the UAE.

    Now: 

    On 14 May 2025, Cabinet Decision No. 55 of 2025 was issued by the UAE Ministry of Finance. This decision expands the scope of Corporate Tax (CT) exemptions to cover certain foreign juridical persons, retrospectively effective from 1 June 2023.

    Foreign juridical persons (companies and legal entities) can enjoy the same tax exemption as UAE-incorporated entities if they are wholly owned by an exempt person and meet specific operational and ownership criteria.

    Who Are the Exempt Owners?

    The exemption applies if the foreign entity is 100% owned and controlled by one of the following exempt entities:

    • Federal and Emirate Government bodies
    • Government-controlled entities
    • Qualifying investment funds
    • Public pension funds
    • Social security funds

    These exempt owners are already listed under Article 4(1) of the UAE Corporate Tax Law and enjoy full tax exemption on their qualifying income.

    What Are the Conditions for Tax Exemption?

    For a foreign juridical person to qualify under this new rule, it must meet one or more of the following conditions:

    1. Aligned Business Activities

    The foreign entity must undertake part or all of the same activities carried out by the exempt owner.

    Example: A foreign investment vehicle conducting real estate investments on behalf of a UAE pension fund.

    2. Exclusive Asset Holding

    The entity must hold assets or invest funds exclusively for the benefit of the exempt owner.

    Example: A foreign SPV (Special Purpose Vehicle) that owns a portfolio managed on behalf of a sovereign fund.

    3. Support Functions

    The entity must carry out activities that directly support or facilitate the exempt owner’s operations.

    Example: A foreign company providing IT or back-office support to a UAE government-owned enterprise.

    Additional Requirement: UAE-Based Management

    The foreign entity must have its Place of Effective Management (POEM) in the UAE. This means that the strategic decisions and overall control of the business are exercised from within the UAE, even if the company is incorporated abroad.

    This clause ensures that entities claiming exemption have real economic substance and operations tied to the UAE, avoiding misuse of the exemption status.

    Why Is This Update Important?

    The expanded exemption offers several key benefits:

    1. Eliminates Discrimination

    Ensures that foreign-owned entities are not at a disadvantage compared to UAE-incorporated entities under the same ownership.

    2. Boosts Global Investment Appeal

    Reinforces the UAE’s attractiveness as a destination for holding companies, sovereign funds, and institutional investors.

    3. Encourages Restructuring

    Encourages existing foreign entities to reassess their UAE presence and possibly shift key management operations to the UAE to benefit from the exemption.

    4. Supports UAE’s Global Tax Commitments

    Aligns with OECD international tax frameworks, adding credibility to the UAE’s tax regime on the global stage.

    What Should Businesses Do Now?

    This update creates a strategic opportunity for foreign investors and organizations to optimize their UAE tax position. Here’s what businesses should consider:

    1. Reassess Corporate Structures

    Foreign entities should examine their ownership and control structure to see if they now qualify.

    2. Check Place of Effective Management (POEM)

    Confirm whether the strategic decisions are being made from the UAE—this is key for eligibility.

    3. Ensure Compliance with Article 4(1)(h)

    Ensure your activities align with the new conditions for exemption.

    4. Maintain Proper Documentation

    You’ll need supporting records to prove ownership, control, and operational alignment with the exempt owner.

    How Shuraa Tax Can Help

    At Shuraa Tax, we make it easy for businesses, local and foreign, to understand the UAE’s evolving tax landscape. With in-depth knowledge of the UAE Corporate Tax Law and international tax structures, we can:

    • Evaluate your eligibility under the updated tax exemption
    • Advise on restructuring your business to benefit from the exemption
    • Handle all corporate tax registrations, documentation, and filings
    • Assist with POEM assessments and documentation
    • Offer ongoing compliance and tax planning support

    The UAE’s decision to extend corporate tax exemptions to certain foreign-owned entities is a welcome and strategic move. It sends a clear message: the UAE is open, fair, and committed to aligning its business environment with global best practices.

    If you’re a foreign government body, investment fund, or pension fund or if you’re doing business with one, this could be your chance to benefit from a 0% corporate tax rate in the UAE.

    Contact Shuraa Tax today to explore how this update affects your business and take the right steps to stay compliant and competitive. +

  • E-invoicing In Saudi Arabia: Step-by-step Guide

    E-invoicing In Saudi Arabia: Step-by-step Guide

    Saudi Arabia is going through a major digital change as part of its Vision 2030 plan, and one important step in this journey is the move to e-invoicing. To make business transactions more transparent and efficient, the Zakat, Tax and Customs Authority (ZATCA) has introduced new rules that require businesses to switch from paper invoices to electronic ones.

    If you’re a business owner in Saudi Arabia, it’s important to understand how this system works and what you need to do to stay compliant.

    What is E-invoicing in Saudi Arabia?

    In Saudi Arabia, e-invoicing, commonly known as Fatoorah, is a government-mandated process that replaces traditional paper invoices with fully digital ones. Instead of printing and manually storing invoices, businesses must now generate, issue, and keep them electronically.

    The Zakat, Tax and Customs Authority (ZATCA) introduced e-invoicing in two key phases. Phase 1, which began on December 4, 2021, focuses on the digital creation and storage of invoices. Phase 2, launched on January 1, 2023, goes a step further by requiring businesses to integrate their e-invoicing systems directly with ZATCA’s Fatoora platform for real-time reporting and validation.

    Traditional vs. Electronic Invoicing

    Let’s understand at how electronic invoicing (e-invoicing) compares to the old way of issuing paper invoices.

    Traditional Invoicing

    • Invoice Creation: Invoices are created manually, often on paper or simple digital files like PDFs or Word Documents.
    • Format and Structure: No standard structure; format varies by business, which can cause errors or inconsistencies.
    • Delivery Method: Invoices are sent via email or printed and mailed physically.
    • Government Integration: No integration with government tax systems.
    • Reporting: Reporting is manual and usually delayed, making tax audits and compliance slower.

    Electronic Invoicing

    • Invoice Creation: Invoices are generated electronically in a standardised digital format specified by ZATCA.
    • Authentication: Invoices are digitally signed to ensure authenticity and integrity.
    • System Integration: During Phase 2, businesses must integrate their invoicing system with ZATCA’s Fatoora platform for real-time invoice submission and validation.
    • Reporting: Reporting to tax authorities is automatic and immediate, improving accuracy and compliance.

    Legal Framework and ZATCA’s E-invoicing Mandate

    The Zakat, Tax and Customs Authority (ZATCA) is the governing body responsible for implementing and overseeing the e-invoicing system in Saudi Arabia. Its primary objectives include:

    • Enhancing Transparency: By digitizing invoices, ZATCA aims to reduce the shadow economy and ensure accurate reporting of transactions.
    • Improving Compliance: E-invoicing facilitates real-time monitoring, making it easier for businesses to adhere to tax regulations.
    • Reducing Fraud: Electronic records are harder to manipulate, thereby minimizing fraudulent activities,

    Key Regulations and Compliance Requirements

    The e-invoicing in Saudi Arabia mandate is structured into two main phases, each with specific requirements:

    Phase 1: Generation Phase

    Effective Date: December 4, 2021

    Requirements: 

    • Businesses must generate and store electronic invoices and notes using compliant systems.
    • Inclusion of QR codes on invoices, particularly for B2C transactions.
    • Optional features include XML formatting, digital signatures, and unique invoice identifiers.

    Phase 2: Integration Phase

    Effective Date: January 1, 2023

    Requirements: 

    • Integration of the business’s e-invoicing system with ZATCA’s Fatoora platform for real-time invoice validation and reporting.
    • Mandatory use of XML format for invoices, incorporating elements like QR codes and digital signatures.
    • Implementation of security features to prevent tampering and ensure data integrity.

    Phases of Implementation (Phase 1: Generation; Phase 2: Integration)

    Phase 2 is being implemented in waves, targeting taxpayers based on their annual VAT-subjected revenues. ZATCA notifies each group at least six months prior to their integration deadline. Key waves include:

    • Wave 15: Taxpayers with revenues exceeding SAR 4 million during 2022 or 2023; integration by 1 March 2025.
    • Wave 16: Revenues over SAR 3 million; integration by 1 April 2025.
    • Wave 17: Revenues over SAR 2.5 million; integration by 31 July 2025.
    • Wave 19: Revenues over SAR 1.75 million; integration by 30 September 2025.
    • Wave 21: Revenues over SAR 1.25 million; integration by 30 November 2025.
    • Wave 22: Revenues over SAR 1 million; integration by 31 December 2025.

    Each wave’s criteria are based on revenues from 2022, 2023, or 2024. ZATCA continues to announce subsequent waves, progressively encompassing businesses with lower revenue thresholds.

    Who Must Comply with E-invoicing in Saudi Arabia?

    E-invoicing is mandatory for the following entities under the VAT system:

    • VAT-Registered Businesses: All businesses registered for VAT in Saudi Arabia must issue e-invoices.
    • Entities Required to Register for VAT: If your business meets the VAT registration threshold, you must also comply with e-invoicing rules.
    • Third Parties: Agents or service providers issuing invoices on behalf of VAT-registered businesses must follow e-invoicing regulations.
    • Resident Taxable Persons: Individuals or businesses residing in Saudi Arabia and conducting taxable activities are included.

    Who Is Exempt? Non-Resident Taxable Persons: Foreign businesses that are not residents in Saudi Arabia are currently exempt.

    Which Transactions Are Covered? 

    • B2B, B2C, and B2G: E-invoicing applies to sales between businesses, businesses and consumers, and businesses and government entities.
    • Also applies to credit and debit notes.

    Types of E-invoices in Saudi Arabia

    Under the e-invoicing regulations by ZATCA, there are two main types of electronic invoices that businesses must issue:

    1. Standard Tax Invoice

    The Standard Tax Invoice is used for business-to-business (B2B) and business-to-government (B2G) transactions. It includes detailed information such as the seller and buyer’s VAT numbers, invoice number, VAT amount, and more. This type of invoice allows the buyer to claim input VAT and, in Phase 2, must be issued in a specific XML format embedded within a PDF/A-3 file.

    2. Simplified Tax Invoice

    The Simplified Tax Invoice is designed for business-to-consumer (B2C) transactions. It contains basic details like the seller’s information, total amount, VAT charged, and a QR code. This invoice is usually issued at the point of sale and is simpler than the standard invoice, making it suitable for retail and consumer-facing businesses.

    How to Implement E-invoicing in Your Business in Saudi Arabia?

    Implementing e-invoicing in Saudi Arabia may seem complex at first but breaking it down into steps can make the process much easier.

    Step 1: Understand the Regulations

    Start by familiarizing yourself with ZATCA’s e-invoicing rules, including the two phases:

    • Phase 1 (Generation): You need to generate and store invoices electronically.
    • Phase 2 (Integration): Your system must be integrated with ZATCA’s Fatoora portal.

    Step 2: Assess Your Current Invoicing System

    Check if your current billing or ERP system supports e-invoicing. If not, you’ll need to upgrade or switch to an approved solution that meets ZATCA’s technical specifications.

    Step 3: Choose a Compliant E-invoicing Solution

    Select an e-invoicing software or service provider that is registered with ZATCA and supports invoice generation, digital signatures, QR codes, and integration with the Fatoora portal.

    Step 4: Implement Security and Data Accuracy Measures

    Ensure each invoice is digitally signed with a UUID and cryptographic stamp to prevent tampering. Store e-invoices securely for a minimum of six years, as mandated by ZATCA.Implement validation checks to ensure the accuracy of invoice details before submission.

    Step 5: Prepare Your Team

    Train your finance and operations team on how to use the new e-invoicing system, including how to issue standard and simplified tax invoices.

    Step 6: Configure and Test Your System

    Work with your IT team or service provider to configure the system according to ZATCA’s requirements. Run test invoices to ensure everything, from formatting to QR codes, is correct.

    Step 7: Go Live and Stay Updated

    Once your system is ready, begin issuing e-invoices as per the mandated timeline. Keep monitoring updates from ZATCA, as new waves of Phase 2 integration are rolled out progressively.

    Get Your Business E-invoice Ready Today

    E-invoicing in Saudi Arabia is not just a rule, it’s part of the country’s move toward a smarter, digital future. If your business hasn’t started yet, now is the right time. Getting on board early means you’ll avoid last-minute rush, stay fully compliant with ZATCA, and enjoy long-term benefits like better record-keeping, fewer errors, and faster processing.

    But we understand it can feel confusing at first and that’s where Shuraa Tax can help.

    Our experts will guide you through the entire e-invoicing process, from choosing the right ZATCA-approved software to setting it up and keeping you updated with the latest rules.

    Need help with e-invoicing? 

    Reach out to Shuraa Tax today, we’re here to make the process simple and stress-free.

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