Shuraa Tax Blog

Author: Ritish Sharma

  • Penalty for Late Payment of VAT in UAE

    Penalty for Late Payment of VAT in UAE

    VAT (Value Added Tax) was introduced in the UAE on January 1, 2018, at a standard rate of 5%. It applies to most goods and services, with some exemptions. Businesses must register for VAT if their taxable revenue exceeds AED 375,000 annually. Those earning between AED 187,500 and AED 375,000 can register voluntarily.

    Paying VAT on time is crucial to avoid penalties and maintain a good standing with the Federal Tax Authority (FTA). VAT Late payments can lead to financial fines and disrupt business operations. It’s essential for companies to stay compliant by meeting deadlines and keeping accurate tax records.

    Failure to comply with VAT payment deadlines can result in significant penalties. As of 2026, the structure for VAT late payment penalty in UAE is as follows:

    • 2% penalty on the unpaid amount immediately after the due date.
    • 4% additional penalty if the tax is not paid within seven days after the due date.
    • 1% daily penalty, starting from one month after the due date, up to a maximum of 300%.

    To avoid this penalty for VAT late payment, businesses should set reminders, maintain proper records, and seek expert tax assistance.

    Understanding VAT in UAE

    Value Added Tax (VAT) is a consumption tax levied on most goods and services within the country. Businesses registered for VAT collect the tax at a rate of 5% on their taxable supplies and account for it to the Federal Tax Authority (FTA).

    Consumers ultimately bear the cost of VAT as a 5% increase in the price of goods and services they purchase.

    Here are some key points about VAT in UAE: 

    • The general VAT rate is 5% on most goods and services.
    • A 0% VAT rate applies to exports, international transportation, certain medical and educational services, and the first supply of residential real estate.
    • Some goods and services are completely exempt from VAT, such as financial services, local passenger transport, and bare land.
    • Businesses with taxable supplies exceeding AED 375,000 in the past 12 months or expected to exceed that amount in the next 30 days must register for VAT.
    • Voluntary registration is possible for businesses exceeding AED 187,500.

    Who Needs to Pay VAT in UAE?

    • Mandatory Registration: Businesses with taxable supplies and imports exceeding AED 375,000 per year must register for VAT.
    • Voluntary Registration: Businesses earning between AED 187,500 and AED 375,000 can register voluntarily.
    • Foreign Businesses: Non-resident businesses providing taxable goods or services in the UAE may also need to register and pay VAT.

    Late Payment of VAT in UAE

    Late payment of VAT in the UAE occurs when a registered business fails to pay their due VAT amount to the Federal Tax Authority (FTA) within the specified timeframe. This timeframe is typically 29 days from the end of the tax period.

    Late payment of VAT in the UAE can have several negative consequences for businesses, including:

    1. Penalties

    The FTA imposes steep VAT late payment penalty in UAE. These penalties are calculated as follows:

    • Immediate Penalty: A 2% penalty on the unpaid tax amount is applied immediately after the due date.
    • One Month Later: An additional 4% penalty is levied if the tax is not paid within seven days after the due date.
    • Daily Penalty: A 1% daily penalty accrues on the outstanding amount starting from one month after the due date, up to a maximum of 300% of the unpaid tax.

    2. Administrative Fines

    In addition to penalties, the FTA may impose administrative fines for non-compliance, such as late submission of tax returns or failure to maintain proper records.

    3. Reputational Damage

    Repeated late payments can damage a business’s reputation and relationships with clients and suppliers.

    4. Legal Action

    In extreme cases, the FTA may take legal action against businesses with significant outstanding VAT amounts.

    Deadline for VAT Payment in UAE

    The FTA assigns businesses a monthly or quarterly VAT filing schedule based on their annual turnover:

    Quarterly Filing: Most businesses file their VAT returns every three months.

    Monthly Filing: Large businesses with high turnover may be required to file VAT returns every month.

    VAT returns and payments must be submitted by the 28th day of the month following the tax period. If the deadline falls on a weekend or public holiday, payment should be made on the last working day before the due date.

    VAT Violations and Penalties in UAE

    The VAT penalties in the UAE can be severe, depending on the nature of the violation and the frequency of offenses. Here are some of the common violations along with their penalties in 2025:

    VAT Violation  VAT Penalty in UAE
    Failure to Register for VAT  AED 10,000
    Late Submission of VAT Return  – First offense: AED 1,000
    – Repeated offense within 24 months: AED 2,000
    Late Payment of VAT  – 2% of the unpaid tax immediately after the due date
    – 4% additional penalty if the tax is not paid within seven days after the due date
    – 1% daily penalty on the outstanding amount starting one month after the due date, up to a maximum of 300% of the unpaid tax
    Failure to Maintain Proper Records  – First offense: AED 10,000
    – Repeated offense within 24 months: AED 50,000
    Failure to Issue Tax Invoice or Credit Note  AED 5,000 per missing document
    Submission of Incorrect Tax Return  – First offense: AED 3,000
    – Repeated offense within 24 months: AED 5,000
    Failure to Submit Required Records Upon FTA Request  AED 20,000
    Failure to Notify FTA of Charge of Tax Based on the Margin  AED 2,500
    Not Displaying Prices Inclusive of VAT  AED 15,000
    Failure to Comply with Procedures for Transfer of Goods in Designated Zones  The higher of AED 50,000 or 50% of the tax unpaid on the goods as a result of the violation
    Tax Evasion Up to 300% of the tax evaded

    Please note VAT late payment penalty in UAE may vary depending on the specific nature and severity of the violation. It is recommended to consult with a tax professional such as Shuraa Tax for accurate and up-to-date information.

    Late VAT Deregistration Penalty in UAE

    UAE businesses are required to apply for VAT deregistration within 20 business days if they no longer meet the criteria for VAT registration. Failing to do so results in penalties imposed by the Federal Tax Authority (FTA).

    Late VAT Deregistration Penalties:

    • Initial Penalty: A fine of AED 1,000 is imposed if the deregistration application is not submitted within the stipulated 20-business-day period.
    • Recurring Penalty: An additional AED 1,000 is charged for each month the delay continues, up to a maximum of AED 10,000.

    Common Reasons for Late VAT Payment in UAE

    Several reasons may contribute to the late payment of VAT in the UAE. Some common factors include:

    1. Cash flow issues

    Businesses may struggle to pay their VAT on time if they are experiencing cash flow difficulties due to slow sales, unexpected expenses, or other financial challenges.

    2. Accounting errors

    Mistakes in calculating or recording VAT can lead to late payments.

    3. Lack of awareness

    Some businesses may not be fully aware of their VAT obligations and deadlines, resulting in unintentional late payments.

    4. System failures

    Technical issues with the FTA e-Services portal or a business’s internal accounting software can sometimes delay VAT payments.

    VAT Fines Discount in UAE

    VAT Fines Discount in the UAE refers to various incentives offered by the Federal Tax Authority (FTA) to encourage timely VAT compliance and reduce the financial burden on businesses facing penalties. These discounts apply specifically to administrative penalties, not the actual VAT liability you owe.

    There are currently two main ways to access VAT Fines Discounts:

    1. Penalty Redetermination Scheme

    This scheme allows for a significant reduction of previously imposed administrative penalties. You can get 70% of your past fines waived by paying only 30% of the original amount. The business must have a clean record of VAT compliance.

    2. Early Payment Discount

    The FTA offers a 5% discount on late payment penalties if the outstanding VAT amount is paid within 15 days of the due date. This discount can be combined with the penalty redetermination scheme for potentially significant savings.

    How to Avoid VAT Fine for Late Payment

    Avoiding late VAT payments in the UAE can save you from unnecessary penalties and maintain good standing with the Federal Tax Authority (FTA).

    Here are some key strategies to keep in mind:

    • Familiarize yourself with the VAT registration threshold, filing deadlines, and record-keeping requirements.
    • Maintain accurate records of your taxable supplies and input VAT to accurately calculate your VAT liability each month.
    • Mark your calendar with important deadlines for filing and payment to avoid missing them.
    • Utilize accounting software or platforms to automate VAT calculations, filing, and payment wherever possible.
    • Take advantage of the 5% discount offered by the FTA for early VAT payments.
    • Ensure your accounting system accurately reflects all VAT transactions and calculations.
    • Before submitting your VAT return, carefully review your calculations and ensure they are correct.

    And most importantly, seek professional advice!

    Choose Smart Compliance with Shuraa Tax

    Timely VAT payments are crucial for businesses in the UAE to maintain compliance and ensure their financial well-being. VAT late payment penalty in UAE can significantly impact a company’s bottom line.

    Therefore, it is highly beneficial to seek assistance from a leading tax consultant like Shuraa Tax. With our team of knowledgeable and qualified accountants, auditors, and tax advisors in Dubai, we offer comprehensive VAT solutions to businesses of all sizes.

    From registration and filing to consultations and dispute resolution, we guide you through every step with expertise. We help you understand your obligations, minimize risks, and optimize your VAT compliance to ensure your business operate seamlessly and efficiently.

    Call us Today and get your queries answered in no time. Let’s simplify taxation together.

    📞 Call: +(971) 44081900

    💬 WhatsApp: +(971) 508912062

    📧 Email: info@shuraatax.com

    Frequently Asked Questions

    1. What is the penalty for late VAT registration in the UAE?

    Businesses that fail to register for VAT within the required timeframe are subject to a penalty of AED 10,000.

    2. How much is the penalty for late VAT payment?

    The penalty structure for late VAT payment is as follows:

    • 2% of the unpaid tax immediately after the due date.
    • 4% additional penalty if the tax remains unpaid after seven days.
    • 1% daily penalty on the outstanding amount starting one month after the due date, up to a maximum of 300%.

    3. Are there penalties for incorrect VAT return submissions?

    Yes, submitting an incorrect VAT return can result in a penalty of AED 3,000 for the first offense and AED 5,000 for subsequent offenses.

    4. Can VAT penalties in the UAE be waived or reduced?

    The Federal Tax Authority (FTA) may consider waiving or reducing penalties under specific circumstances. Businesses must submit a request through the FTA’s e-services portal, providing valid reasons and supporting documentation for the non-compliance.

  • A Guide on Accounting Standards in UAE

    A Guide on Accounting Standards in UAE

    In today’s globalized business world, accounting standards play a crucial role in ensuring transparency, accuracy, and comparability in financial reporting. As the UAE continues to establish itself as a major player in the global economy, understanding and adhering to these accounting standards in UAE is of utmost importance for businesses operating in the country.

    Also, the recent introduction of corporate tax in the UAE has further emphasized the importance of adhering to accounting standards. With the implementation of tax laws, businesses are now required to maintain accurate and up-to-date financial records in line with internationally recognized accounting principles.

    Understanding these standards is essential not only for ensuring compliance with tax regulations but also for making informed business decisions and attracting potential investors. So, let’s get started.

    What Exactly is Accounting Standards?

    Imagine a world where every company recorded their finances differently, using their own unique methods and definitions. It would be a chaotic mess, with investors and creditors left scratching their heads, unable to compare or trust financial information.  

    This is where accounting standards step in, acting as the shared language of financial reporting. 

    Accounting standards are a set of established rules, principles, and procedures that dictate how financial transactions and events are recorded, measured, presented, and disclosed in financial statements. Think of them as the grammar and vocabulary of the accounting world, ensuring consistent and comparable reporting across businesses. 

    Types of Accounting Standards

    1. International Financial Reporting Standards (IFRS) – The most widely used global accounting standards 
    1. International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs) 
    1. Generally Accepted Accounting Principles (GAAP) 
    1. Cash Basis Accounting – A simpler method where revenue is recognized when received and expenses when paid. 
    1. National Accounting Standards – Some countries have their own national accounting standards that may coexist with international standards. 

    UAE Regulatory bodies governing accounting standards

    1. Emirates Securities and Commodities Authority (ESCA)

    ESCA is the primary regulatory body for the financial markets in the UAE, including listed companies and their financial reporting practices. ESCA issues Accounting Standards and pronouncements in line with international best practices and IFRS.

    2. International Financial Reporting Standards (IFRS)

    The UAE has adopted IFRS as its national accounting standards, with some minor modifications for local specificities. This signifies the UAE’s commitment to global financial transparency and comparability. 

    Accounting Standards in the UAE

    The core accounting standards in UAE are largely based on International Financial Reporting Standards (IFRS), with some minor modifications for local specificities. These standards are issued by the Emirates Securities and Commodities Authority (ESCA), the primary regulatory body for the financial markets in the country. 

    A. International Financial Reporting Standards in UAE

    In the UAE, the introduction of corporate tax has made IFRS (International Financial Reporting Standards) the mandatory language of financial reporting for most businesses. 

    Mandatory for the Majority:

    • All businesses exceeding AED 50 million in annual revenue must comply with full IFRS. 
    • This ensures transparency and comparability of financial statements for investors, creditors, and tax authorities. 

    Key Concepts:

    • IFRS focuses on providing relevant and reliable information for decision-making, emphasizing accrual accounting, fair value measurement, and the going concern principle. 
    • This means transactions are recorded when they occur, not just when cash is exchanged, and assets and liabilities are valued at their current market prices. 

    B. IFRS for SMEs in the UAE

    It’s a condensed version of the full International Financial Reporting Standards (IFRS), tailored specifically for the needs of smaller businesses. If your business in the UAE has annual revenue below AED 50 million, you automatically qualify to use IFRS for SMEs for your financial reporting. 

    It provides reduced disclosure requirements and less complex accounting rules compared to full IFRS. This makes compliance easier and less time-consuming. 

    C. Cash Basis Accounting for Specific Cases

    In limited circumstances, businesses with revenue under AED 3 million or under specific exemptions may be allowed to use cash basis accounting. This method records transactions only when cash is received or paid out, but it may not accurately reflect the true financial position of the business. 

    D. Local GAAP for Exempt Entities

    Some entities exempt from corporate tax may be allowed to use local Generally Accepted Accounting Principles (GAAP). However, this is rare, and most businesses will still need to comply with IFRS or IFRS for SMEs for tax purposes. 

    E. Role of the UAE Ministry of Finance and Federal Tax Authority

    While the International Accounting Standards Board (IASB) sets IFRS, the UAE Ministry of Finance and the Federal Tax Authority play a role in interpreting and applying these standards within the UAE context. They may issue guidance or clarifications on specific issues relevant to the UAE market or tax regulations. 

    Who Needs to Follow Accounting Standards in the UAE?

    With the introduction of corporate tax in the UAE, understanding who needs to follow accounting standards has become crucial for businesses. Under the UAE Corporate Tax Law, a “Taxable Person” is any entity that carries on a “Taxable Activity” within the UAE. This includes, but is not limited to: 

    • Companies incorporated in the UAE 
    • Branches of foreign companies 
    • Individuals carrying on a business 
    • Joint ventures, partnerships, and trusts 

    Even if you are exempt from using IFRS or IFRS for SMEs, you still need to maintain accurate financial records and comply with other relevant accounting and tax regulations. 

    Seeking professional advice from qualified accountants or tax advisors is highly recommended to ensure proper compliance of accounting standards in Dubai or UAE and optimize your tax reporting. 

    Key Accounting Principles in the UAE

    While the UAE doesn’t have its own set of “Key Accounting Principles” like some countries, several important principles underly the application of International Financial Reporting Standards (IFRS) and other accounting frameworks within the UAE context.  

    1. Accrual Basis Accounting

    Records transactions when they occur, not just when cash is exchanged, providing a more accurate picture of the company’s financial health. 

    2. Going Concern Principle

    Assumes the entity will continue operating in the foreseeable future, affecting various valuation and recognition aspects. 

    3. Fair Value Measurement

    Assets and liabilities are valued at their current market price as opposed to historical cost, enhancing transparency and reliability. 

    4. Matching Principle

    Expenses are recognized in the same period as the revenue they are incurred to generate, ensuring accurate income presentation. 

    5. Prudence Principle

    Requires cautiousness in reporting, recognizing expenses and potential losses promptly but holding off on recognizing potential gains until they are realized. 

    Corporate Tax Law in the UAE

    Corporate Tax is levied on the Taxable Income, which is broadly defined as the net profit before tax calculated in accordance with IFRS or IFRS for SMEs. Certain adjustments may be required to align with the tax provisions. 

    The standard corporate tax rate is 9% for taxable income exceeding AED 375,000. Income below this threshold is exempt from tax. Businesses operating within designated free zones may have different tax treatments depending on their specific agreements and activities.  

    In general, no withholding tax is applied to dividends or other distributions paid out of Taxable Income. Taxable Persons are required to file tax returns annually with the Federal Tax Authority. Penalties may be imposed for non-compliance with the law and associated regulations. 

    Take the First Step with Shuraa Tax by Your Side

    Understanding and complying with accounting standards in the UAE is crucial for businesses and individuals alike. By adhering to these standards, companies can ensure accurate and transparent financial reporting, which in turn builds trust with stakeholders and investors. 

    It also helps businesses stay compliant with legal requirements and avoid penalties or legal issues. Seeking professional advice from tax advisors, such as Shuraa Tax, can further enhance this process. 

    Our experts have in-depth knowledge of the local accounting standards in Dubai and can guide businesses through the process, ensuring compliance while maximizing financial efficiency.  

    Shuraa Tax offers comprehensive accounting services tailored to the unique needs of businesses in the UAE. Our suite of services encompasses precise accounting practices, ensuring compliance with standards while optimizing financial efficiency. 

    Get in touch today at +971508912062. You can also drop us an email at info@shuraatax.com and get your queries answered in no time. Let’s minimize tax risks and optimize your tax positions.

  • VAT on Transportation Services in UAE

    VAT on Transportation Services in UAE

    As you may know, VAT is a consumption tax that is levied on goods and services at each stage of production and distribution. It is an important source of revenue for governments around the world, including the UAE. Within the framework, the significance is particularly important in transportation services. As the UAE continues to evolve economically, understanding the complexities of VAT on transportation services in UAE becomes essential for businesses operating in this sector.

    But fear not, we’ll break down the essentials of transportation VAT in UAE in a way that’s clear and easy to digest, so you can keep your finances on track and enjoy your journeys without any bumps in the road.

    What is VAT in the UAE?

    Value Added Tax (VAT) was introduced in the UAE on January 1st, 2018, as a new source of government revenue and diversification from oil dependence. It’s a consumption tax levied at each stage of the supply chain, ultimately borne by the final consumer. 

    The standard VAT rate in the UAE is 5%. This applies to most goods and services, with some exceptions. 

    Businesses whose taxable supplies and imports exceed AED 375,000 in the last 12 months are mandatory to register for VAT. Voluntary registration is possible for businesses exceeding AED 187,500. 

    Registered businesses must file VAT returns electronically every tax period (usually monthly or quarterly). 

    Applicability of VAT on Different Goods and Services in UAE

    • Standard rate (5%): Applies to most goods and services, including electronics, clothing, restaurants, hotels, and transportation.
    • Zero rate (0%): Applies to specific goods and services, such as exports outside the GCC, international transportation, certain medical and educational services, and the first supply of residential property.
    • Exempt: Certain goods and services are completely exempt from VAT, such as local public transport, basic foodstuffs, and financial services. 

    Role of Federal Tax Authority (FTA)

    The Federal Tax Authority (FTA) is the government agency responsible for administering, collecting, and enforcing federal taxes in the UAE. This includes Value Added Tax (VAT), excise taxes, and corporate income tax.

    The FTA is responsible for administering the VAT system in the UAE. The FTA issues regulations and guidance on VAT compliance and also enforces it through audits and penalties.

    VAT Rates and Exemptions for Transportation Services

    The UAE’s VAT system applies to various sectors, including transportation. However, there are specific rates and exemptions for different types of transportation services, making it crucial to understand the nuances to avoid any compliance issues.

    The standard VAT rate in the UAE is 5%. This applies to most goods and services, including many transportation services.

    However, there are some specific exemptions for VAT on transportation in UAE:

    Domestic passenger transportation

    Any transportation of passengers within the UAE, by land, water, or air, is exempt from VAT. This includes taxis, buses, trains, trams, ferries, and similar modes of transport.

    International transportation

    • International passenger and goods transportation, including intra-GCC (Gulf Cooperation Council) travel, is zero-rated. This means the VAT rate is 0%, but businesses involved must still comply with certain VAT reporting requirements.
    • Supply of means of transport (air, sea, or land) for commercial transport of goods and passengers (over 10 people) is also zero-rated. This includes the leasing or chartering of airplanes, ships, and trucks for commercial use.
    • Goods and services related to these means of transport and to the transportation of goods and passengers are also zero-rated. This could include maintenance and repair services for vehicles used in international transport, catering services for passengers on board, and ground handling services for airplanes.

    Local passenger transport services for pleasure trips

    Not exempt from VAT and are subject to the standard 5% rate. This could apply to tourist cruises or private jet charters within the UAE.

    International passenger transport services by aircraft that constitute “international carriage”

    Not exempt and are subject to the standard 0% rate. This could apply to flights that originate or terminate outside the UAE even if they have a stopover within the country.

    Import of vehicles

    Subject to the standard 5% VAT rate.

    Free zones

    Some free zones in the UAE have special VAT regulations, so it’s important to check the specific rules for the relevant free zone.

    Zero-rating vs. Exemption Transportation VAT in UAE

    The key difference between zero-rating and exemption in the context of VAT on transportation services in the UAE lies in whether the business can claim input tax refunds. 

    Zero-rating

    While there is no actual tax charge, businesses still need to: 

    • Issue proper tax invoices with a 0% VAT rate. 
    • Maintain records of zero-rated supplies. 
    • File VAT returns. 

    Businesses can claim back the VAT paid on expenses incurred while providing zero-rated services. This helps reduce their overall tax burden. 

    Exemption

    No VAT is charged. The transaction is completely outside the scope of VAT.

    Businesses cannot claim back any VAT paid on expenses related to exempt supplies. This can disadvantage businesses with high input costs.

    Transportation VAT Implications for Businesses and Individuals

    The implications of VAT on transportation services in the UAE differ for businesses and individuals, depending on the specific type of service and its treatment under the VAT law. Here are some of the key implications: 

    • Domestic passenger transport, including taxis, buses, and trains, is exempt from VAT. This simplifies compliance for businesses operating in this sector. 
    • Flights, airfares, etc., are subject to the zero-rating benefit, potentially leading to lower costs compared to standard VAT rates. 
    • The zero-rating incentivizes international travel to the UAE, benefiting airlines, hotels, and tourist attractions. 
    • Businesses involved in zero-rated services can claim VAT paid on related expenses, improving cash flow. 
    • Zero-rated transactions still require proper tax invoices, record-keeping, and VAT return filing. 
    • Businesses can choose to absorb the VAT cost, pass it on to customers, or adjust pricing based on specific services. 
    • Some individuals may benefit from claiming input tax refunds on travel expenses related to their business activities. 

    Tax Matters Made Simple with Shuraa

    The introduction of VAT in the UAE has brought a new layer of complexity to the transportation sector. And, as the UAE continues to evolve economically, staying informed about tax regulations becomes not just a choice but a strategic necessity for businesses. 

    In this ever-changing tax landscape, seeking professional guidance becomes essential, and that’s where Shuraa Tax steps in. We, at Shuraa Tax, are more than just a team of knowledgeable and qualified accountants, auditors, and tax advisors in Dubai, UAE. Our mission is to assist businesses in simplifying their taxation and financial management needs. 

    Call us at +971508912062. You can also drop us an email at info@shuraatax.com and get your queries answered in no time. Let’s simplify taxation together!

  • Small Business Relief from the UAE Corporate Tax

    Small Business Relief from the UAE Corporate Tax

    The United Arab Emirates (UAE) has long been a haven for entrepreneurs and businesses seeking a favorable tax environment. As a result, the UAE Ministry of Finance introduced Ministerial Decision No. 73 of 2023 on April 3rd, setting the conditions for small businesses to claim Small Business Relief UAE corporate tax under the new Corporate Tax Law.

    This ministerial decision aims to further promote UAE as the appealing destination for business growth and investment.

    Let’s understand more about the new regime for corporate tax Law. Also, discuss how it going to affect the small businesses in UAE.

    What is UAE Corporate Tax?

    UAE Corporate Tax will be calculated on the taxable adjusted net profit of a business, which is the net profit after deducting all allowable expenses. Allowable expenses include the cost of goods sold, operating expenses, and net interest expense up to 30% of EBTDA.

    The Federal Tax Authority (FTA) will require businesses to file an annual corporate tax return. Therefore, the return will need to include the business’s taxable profits and any other information required by the FTA.

    A Taxable Person must also settle the Corporate Tax Payable within (9) nine months from the end of the relevant Tax Period, or by such other date as determined by the Authority.

    Corporate Tax Rates Under the Corporate Tax Law

    In December 2022, UAE introduced its new corporate tax regime through Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

    This law, set to take effect from June 1, 2023, brings with it a headline tax rate of 9% for accounting periods beginning on or after this date. While this marks a shift toward taxation, it remains a competitive rate on the global stage.

    The UAE Corporate Tax rate will be 9% on taxable income above AED 375,000. There will be a 0% tax rate on taxable income up to AED 375,000.

    To calculate UAE Corporate Tax, businesses will need to start by determining their taxable income. Subsequently, the total income is reduced by subtracting all allowable deductions. These deductions encompass various items such as the cost of goods sold, operating expenses, and depreciation.

    Here is an example of how UAE Corporate Tax would work:

    A company has total income of AED 1 million for the year. The company’s allowable deductions are AED 500,000. Therefore, the company’s taxable income is AED 500,000.

    The company’s corporate tax liability is calculated as follows:

    The first 375,000 will be taxed at 0% and the rest of the amount will be taxed at 9 %.

    1. 375,000 * 0% = 0

    2. 500,000 – 375,000 = 125,000 *.09 = 11,250

    The company will need to pay its corporate tax liability of AED 11,250.

    Eligibility and Thresholds for Corporate Tax Rates

    Ministerial Decision No. 73 of 2023 clarifies the eligibility criteria for Small Business Relief. Businesses with an annual revenue below AED 3 million (approximately USD 817,000) will qualify for this exemption.

    Importantly, this threshold applies to each tax period, including both the relevant tax period and previous tax periods. Once a business’s revenue exceeds this threshold, the Small Business Relief will no longer be available.

    It’s worth noting that businesses availing of this relief can still carry forward incurred tax losses. They can also disallow net interest expenditure from these tax periods for use in future tax periods, provided they elect not to apply for Small Business Relief for the UAE corporate tax.

    However, it’s essential to note that the Small Business Relief exemption does not apply to Qualifying Free Zone companies or members of Multinational Enterprises (MNEs) with consolidated group revenues exceeding AED 3.15 billion. These entities will follow a different tax regime.

    What is the Purpose of the Small Business Relief UAE Corporate Tax?

    To support small businesses and nurture entrepreneurship, the Corporate Tax Law provides for a Small Business Relief exemption. This provision allows small businesses that qualify as Resident Persons to be treated as having no taxable income for a specific tax period.

    The intent behind this relief is clear – to ease the tax burden on small enterprises, encourage their growth, and stimulate economic activity.

    Opportunities for Entrepreneurs to Establish a Business in the UAE

    With the introduction of Small Business Relief and a competitive corporate tax rate, the UAE continues to be an attractive destination for entrepreneurs and businesses. Moreover, here are some opportunities and advantages for those looking to establish a business in the UAE:

    1. Tax Incentives: Small businesses can take advantage of the Small Business Relief to reduce their tax burden, allowing for more flexible financial planning and growth strategies.
    2. Stability and Infrastructure: The UAE offers a stable political environment, world-class infrastructure, and a strategic location connecting East and West, making it an ideal hub for international business operations.
    3. Global Connectivity: The UAE’s advanced transportation and communication networks provide easy access to global markets, facilitating international trade and expansion. Furthermore, this strategic infrastructure positions businesses for seamless connectivity and growth on the global stage.
    4. Diverse Economy: The UAE’s diverse economy spans various sectors, from finance and technology to tourism and logistics, offering a wide range of business opportunities. Additionally, this economic diversity provides entrepreneurs with an abundance of options for investment and growth.
    5. Pro-Business Environment: The government’s commitment to promoting a pro-business environment is evident in its continuous efforts to streamline regulations and improve ease of doing business.

    Streamline Your Taxation with Shuraa

    The UAE’s introduction of Small Business Relief for the corporate tax marks a pivotal moment for entrepreneurs and small enterprises seeking opportunities in establishing business in the UAE. Furthermore, this initiative opens new avenues for growth and competitiveness in the local market.

    However, the UAE taxation process might be a little overwhelming for entrepreneurs. That’s where Shuraa comes in!

    To seize the advantages presented by Small Business Relief UAE corporate tax, businesses can benefit from the expertise of professionals like Shuraa Tax & Accounting Services.

    As a team of knowledgeable and qualified accountants, auditors, and tax advisors in Dubai, UAE, Shuraa offers comprehensive taxation services, including UAE VAT, tax management, and accounting. Moreover, we stand ready to assist businesses in simplifying their taxation and financial management needs.

  • How to Register Corporate Tax in UAE in 2026

    How to Register Corporate Tax in UAE in 2026

    The United Arab Emirates (UAE) introduced a corporate tax system to strengthen its economy and bring its tax policies in line with global standards. As of June 1, 2023, businesses in the UAE are required to pay a 9% corporate tax on profits above AED 375,000. While this change may seem new to many, it plays a key role in supporting the country’s growth and creating a more transparent business environment.

    In 2026, it’s more important than ever for companies and individuals doing business in the UAE to complete their corporate tax registration on time. Failing to register within the deadline set by the Federal Tax Authority (FTA) can result in penalties and legal issues.

    Additionally, starting January 1, 2025, the UAE will impose a 15% minimum top-up tax on large multinational companies with consolidated global revenues of €750 million or more, in line with the OECD’s global minimum tax agreement.

    Therefore, we will guide you through everything you need to know about how to register for corporate tax in UAE in 2026. We’ll explain who needs to register, what documents are required, and the simple steps to complete your registration.

    What is Corporate Tax in UAE?

    Corporate Tax (CT) is a direct tax imposed on the net profits of businesses. Introduced by the UAE government, this tax aims to diversify national revenue sources and align the country’s tax system with international standards.

    The implementation of corporate tax also enhances transparency and supports the UAE’s economic growth by ensuring that businesses contribute fairly to the nation’s development.

    UAE Corporate Tax Rates

    The corporate tax rates in the UAE are structured to support small businesses while ensuring larger entities contribute appropriately:

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

    This tiered approach encourages entrepreneurship and supports the growth of small to medium-sized enterprises.

    Exemptions and Exceptions

    Certain entities and income types are exempt from corporate tax in the UAE:

    • Government Entities: Federal and Emirate-level government bodies.
    • Government-Controlled Entities: Businesses wholly owned by the government.
    • Extractive and Non-Extractive Natural Resource Businesses: Companies involved in the extraction and exploitation of natural resources.
    • Qualifying Public Benefit Entities: Organizations serving the public interest.
    • Qualifying Investment Funds: Funds meeting specific regulatory criteria.
    • Pension or Social Security Funds: Both public and private funds under regulatory oversight.
    • Wholly Owned UAE Subsidiaries: Subsidiaries of exempt entities.

    Additionally, businesses operating in free zones may benefit from a 0% tax rate on qualifying income, provided they meet certain conditions, such as maintaining adequate substance and complying with transfer pricing rules.

    Who Needs to Register for Corporate Tax in UAE?

    UAE corporate tax registration is mandatory for various entities and individuals engaged in business activities.

    1. Mainland Companies

    All businesses operating in the UAE mainland, including Limited Liability Companies (LLCs), Public Joint Stock Companies (PJSCs), and other legal entities.

    2. Free Zone Entities

    Companies established in UAE Free Zones must register for corporate tax, even if they qualify for a 0% tax rate on certain income.

    3. Natural Persons (Individuals)

    Individuals conducting business activities in the UAE, such as freelancers or sole proprietors, must register for corporate tax if their annual turnover exceeds AED 1 million.

    4. Branches of Foreign Companies

    Foreign companies with a permanent establishment or a fixed place of business in the UAE are obligated to register for corporate tax.

    5. Non-Resident Juridical Persons

    Foreign legal entities that have a permanent establishment or derive income from the UAE are subject to corporate tax and must register accordingly.

    6. New Businesses

    Companies incorporated, established, or recognized in the UAE after 1 March 2024 must complete their corporate tax registration within three months from the date of incorporation.

    Failing to register for corporate tax by the specified deadlines can result in an administrative penalty of AED 10,000.

    When to Register for Corporate Tax in 2026?

    The deadlines for corporate tax registration in the UAE depend on your business type, incorporation date, and residency status.

    Resident Juridical Persons (Companies)

    For entities incorporated before 1 March 2024:

    The registration deadline is based on the month your business license was issued:

    License Issuance Month Registration Deadline
    January – February 31 May 2024
    March – April 30 June 2024
    May 31 July 2024
    June 31 August 2024
    July 30 September 2024
    August – September 31 October 2024
    October – November 30 November 2024
    December 31 December 2024

     

    Note: The corporate tax registration deadlines were issued by the UAE Federal Tax Authority in 2024 and apply to entities established before 1 March 2024. Businesses incorporated after that date must register within 3 months of incorporation.

    If your company holds multiple licenses, use the one with the earliest issuance date to determine your deadline.

    For entities incorporated on or after 1 March 2024: 

    • UAE-incorporated entities (including Free Zone companies): Register within 3 months of incorporation.
    • Foreign entities effectively managed and controlled in the UAE: Register within 3 months from the end of their financial year.

    Non-Resident Persons

    Permanent Establishment: Non-resident entities with a permanent establishment in the UAE before March 1, 2024, must register within nine months from the date the permanent establishment was established.

    Documents Required for UAE Corporate Tax Registration

    To register for corporate tax in the UAE, businesses are required to submit specific documents as part of the registration process. These documents help the Federal Tax Authority (FTA) to verify the business and tax details. The general documents include:

    • Trade license
    • Emirates ID / Passport
    • Proof of address
    • Shareholder and director information
    • Corporate bank account details
    • Financial statements (Balance sheets, income statements, etc.)
    • VAT Registration Details (if applicable)
    • Declaration of taxable period
    • Other relevant documents

    Ensure all documents are clear and legible. The FTA accepts digital submissions in PDF or Word formats, with a maximum file size of 5 MB per document. All registrations must be completed through the EmaraTax platform.

    How to Register for Corporate Tax in UAE?

    Here’s a simple step-by-step process for registering corporate tax in the UAE through the Federal Tax Authority’s (FTA) EmaraTax portal.

    1. Access the EmaraTax Portal

    Visit the EmaraTax portal (https://eservices.tax.gov.ae). If you already have an account (e.g., for VAT purposes), log in using your credentials. If you’re a new user, create an account by registering with your email and contact details.

    2. Select or Add a Taxable Person

    Upon logging in, navigate to the “Taxable Person” section. If your business entity isn’t listed, click on “Add Taxable Person” and provide the necessary details.

    3. Initiate UAE Corporate Tax Registration

    Within the Taxable Person dashboard, locate the “Corporate Tax” tile. Click on “Register” to begin the registration process.

    4. Complete Business Information

    Fill in the required details about your business, including:

    • Trade license number and issue date
    • Legal entity type (LLC, Sole Proprietorship, Free Zone Company, etc.)
    • Company address and contact details
    • Financial year start and end dates

    5. Upload Required Documents

    Upload all the necessary documents. Make sure the documents are:

    • Clear and valid
    • In PDF or JPEG format (as per FTA guidelines)
    • Within the file size limits specified on the portal

    6. Add Authorised Signatory

    Input the details of the individual authorised to sign on behalf of the business. Upload necessary identification documents, such as Emirates ID or passport.

    7. Review and Submit Application

    Carefully review all entered information for accuracy. Acknowledge the declaration confirming the correctness of the provided information. Click “Submit” to finalise your Corporate Tax registration application.

    8. Application Review by FTA

    The FTA will review your application and may request additional information if needed. You can track the status of your application through your EmaraTax dashboard.

    9. Receive Corporate Tax Registration Number (TRN)

    Upon approval, you will receive your Corporate Tax Registration Number (TRN) via email and through your EmaraTax account. Save this number for future tax filings and correspondence with the FTA.

    If you’re unsure about any step or need professional assistance, consider reaching out to tax consultants like Shuraa Tax for smooth and hassle-free corporate tax registration in UAE.

    Benefits of Timely UAE Corporate Tax Registration

    Registering for corporate tax on time in the UAE isn’t just about compliance, it also brings several important benefits for your business. Here’s why:

    1. Avoid Penalties

    One of the biggest advantages of registering on time is avoiding fines. The Federal Tax Authority (FTA) imposes an AED 10,000 penalty for late registration.

    2. Build a Strong Business Reputation

    Timely compliance shows that your company is reliable and professional. It helps build trust with clients, investors, and government authorities.

    3. Smooth Tax Filing Later

    Early registration gives you more time to understand the process and get your records in order. It helps you prepare for corporate tax filing and payments without last-minute stress.

    4. Access to FTA Services

    Once registered, you gain access to FTA resources and support for tax-related matters. This includes help with tax returns, exemptions, and any clarifications.

    5. Compliance with UAE Tax Law

    Most importantly, timely registration keeps your business compliant with the UAE Corporate Tax Law, which is mandatory for all applicable entities.

    How Shuraa Tax Can Assist

    Registering for corporate tax in the UAE in 2026 is very important for every business. It helps you follow the law, avoid big fines, and stay ready for future tax filings. The sooner you register, the smoother the process will be, and you won’t have to worry about missing any deadlines. If you’re unsure about where to start or need help with the process, Shuraa Tax is here for you.

    Our team makes corporate tax registration easy and stress-free. We also offer help with VAT registration, accounting & bookkeeping services, and all other tax-related services in the UAE. Get in touch with us today and let us handle all your tax needs

    Contact us today for personalised assistance:

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

  • VAT Group Registration in the UAE

    VAT Group Registration in the UAE

    Value Added Tax (VAT) is a tax applied to most goods and services in the UAE. Introduced in 2018 at a standard rate of 5%, VAT requires businesses to register, collect, and pay taxes to the Federal Tax Authority (FTA). While businesses usually register for VAT individually, companies that have multiple related businesses can choose VAT Group Registration to simplify their tax process.

    VAT Group Registration allows two or more businesses under the same ownership or control to register as a single entity for VAT purposes. This means transactions between these companies are not taxed, making VAT reporting and payments easier. It helps businesses reduce paperwork, save time, and improve cash flow.

    If your business has multiple related entities, VAT Group Registration can be a smart choice. So, let us explain what VAT group registration is, who can apply, how to register, and why it can be beneficial for your company.

    What is VAT Group Registration in UAE?

    VAT Group Registration is a system that allows two or more businesses with shared ownership or control to register as a single taxable entity under UAE VAT law. Instead of each company handling VAT separately, they operate as one unit for tax purposes. This helps businesses simplify VAT compliance, reduce paperwork, and avoid unnecessary tax on transactions between group members.

    Articles 9 & 10 of Cabinet Decision No. (52) of 2017 on the executive regulations of the Federal Decree-Law No. (8) of 2017 on VAT detail the rules for VAT Group Registration, including the requirement for common control and financial links between group members.

    Key features and benefits of VAT Group Registration:

    • One VAT Return for All – Businesses in the group file a single VAT return, reducing paperwork and chances of mistakes.
    • Transactions between registered group members are not subject to VAT, reducing unnecessary tax payments.
    • Saves Time and Effort – Managing VAT for multiple businesses becomes easier and less stressful.
    • Avoiding VAT on intra-group transactions can improve cash flow and reduce financial strain.
    • Businesses can optimize their VAT position and reduce compliance risks.

    How It Differs from Individual VAT Registration

    In individual VAT registration, each business must register separately, file its own VAT returns, and pay VAT on transactions with other businesses, even if they are related. This can lead to complex tax management and higher administrative costs.

    With VAT Group Registration:

    • Businesses within the group do not need to charge VAT on transactions between them.
    • Only one VAT return is filed for the entire group.
    • The group is treated as a single taxable entity, making tax reporting more efficient.

    UAE VAT Group Registration Conditions & Eligibility

    VAT Group Registration is not available to all businesses. To qualify, companies must meet certain criteria set by the Federal Tax Authority (FTA). Businesses that meet the following conditions can apply for VAT Group Registration:

    • The businesses must be related through shared ownership, meaning they have the same controlling entity or person. This could be a parent company and its subsidiaries or businesses owned by the same shareholders.
    • Each entity in the group must be registered for VAT or be eligible for VAT registration under UAE tax laws. If one entity is not eligible for VAT, it cannot be included in the VAT group.
    •  All businesses applying for VAT Group Registration must be operating and conducting taxable activities within the UAE. Companies that only have foreign operations without UAE-based transactions cannot be part of a VAT group.
    • Businesses with a history of VAT fraud, tax evasion, or serious non-compliance issues may not be eligible for VAT Group Registration.

    Relationship Requirements Between Group Entities

    To form a VAT group, the businesses must have a legal and financial relationship. The FTA considers the following factors:

    1. Common Control

    One entity or person must have direct or indirect control over all the businesses within the group. Control is typically determined by ownership structure, voting rights, or decision-making authority.

    2. Shared Ownership Structure

    At least 50% of the ownership should be common among the entities applying for VAT Group Registration. This ensures that the businesses operate as a single economic unit.

    3. Active Business Operations

    Entities included in the VAT group must be engaged in ongoing taxable business activities. Inactive or dormant companies may not be eligible.

    4. Same VAT Accounting Period

    All businesses in the group must follow the same VAT return filing schedule. Different reporting periods can create complications in tax compliance.

    Documents Required for VAT Group Registration in UAE

    To successfully apply for VAT Group Registration, businesses must provide the following documents:

    • Trade license copies for all businesses included in the VAT group
    • VAT Registration Certificates (If the businesses are already VAT registered)
    • Passport copies of business owners
    • Emirates ID copies
    • Proof of common control/ownership Memorandum of Association (MOA) & Articles of Association (AOA)
    • Group organizational structure chart
    • Latest financial statements
    • Authorization letter

    How to Register for VAT Group Registration in the UAE?

    UAE VAT Group Registration is a straightforward process managed by the Federal Tax Authority (FTA). Businesses that meet the eligibility criteria can apply online through the FTA’s e-Services portal.

    Here is a step-by-step process on how to register a VAT group, along with the required documents:

    1. Ensure Eligibility

    Before starting the application, businesses must verify that they meet the eligibility criteria for VAT Group Registration:

    • The entities must be legally related (e.g., parent-subsidiary relationship or common shareholders).
    • Each business must have a valid trade license issued by UAE authorities.
    • The group members must be VAT-registered or eligible for VAT registration.
    • The businesses must have active operations in the UAE with taxable supplies.
    • There should be no history of major VAT non-compliance or violations.

    2. Register for an FTA e-Services Account

    If the businesses are not yet registered for VAT, they need to first complete their individual VAT registrations before applying for VAT Group Registration.

    1. Visit the FTA e-Services portal: https://eservices.tax.gov.ae
    2. Create an account using a valid email ID and password.
    3. Log in and complete the standard VAT registration for each business entity.
    4. Once VAT registration is done, you will receive a Tax Registration Number (TRN) for each entity.

    Only after obtaining a TRN can businesses apply for VAT Group Registration.

    3. Initiate the VAT Group Registration Application

    1. Log in to the FTA e-Services Portal using the credentials of the business that will be the Representative Member of the VAT Group.
    2. Navigate to the VAT Group Registration section and click on “New VAT Group Registration.”
    3. Read the guidelines carefully before proceeding with the application.

    4. Provide Business and Ownership Details

    At this stage, businesses need to provide detailed information about the entities applying for VAT Group Registration.

    • Representative Member: Select the business that will be responsible for submitting VAT returns and payments on behalf of the group.
    • TRNs of Group Members: Enter the Tax Registration Number (TRN) of each business in the group.
    • Legal Relationship: Describe how the businesses are related (e.g., common ownership, parent-subsidiary, or shared financial control).
    • Business Activities: Provide details on the nature of the businesses’ operations and taxable supplies.

    Important Note: The representative member will be legally responsible for VAT compliance, including filing returns and making VAT payments. Businesses should carefully choose the entity that will take on this role.

    5. Upload the Required Documents

    Submit the necessary documents (listed below) to support the application. All documents should be in PDF or JPG format and must be clear and valid.

    6. Review and Submit the Application

    Before submitting the application, carefully review all details to ensure accuracy. Verify that the TRNs of all group members are correctly entered. Ensure that the representative member details are accurate.

    7. FTA Review and Approval Process

    Once submitted, the FTA will review the application, which may take several weeks. The FTA will:

    • Verify the legal and financial relationships between group members.
    • Assess whether the businesses meet the eligibility criteria.
    • Check the tax compliance history of all group members.
    • Request additional information or documents if needed.

    If the application is approved, the VAT Group will be assigned a single VAT Group Tax Registration Number (TRN). If the application is rejected, businesses will receive an email explaining the reasons for rejection and any corrective actions required.

    8. Receive VAT Group Registration Certificate

    Upon approval, the FTA will issue a VAT Group Registration Certificate, confirming the VAT group’s status. This certificate will include:

    • The VAT Group TRN (which replaces individual VAT numbers for VAT filing purposes).
    • Details of all group members.
    • The effective date of VAT Group Registration.

    From this date onward, the VAT Group must submit a single VAT return for all members, with the representative member responsible for compliance.

    Benefits of VAT Group Registration in UAE

    VAT Group Registration allows multiple businesses under common ownership or control to register as a single taxable entity for VAT purposes. Here are the key advantages of VAT Group Registration in the UAE:

    1. Simplified VAT Compliance

    Instead of multiple businesses filing separate VAT returns, the VAT Group submits a single consolidated VAT return. This reduces paperwork, saves time, and ensures easier tax management.

    2. No VAT on Intra-Group Transactions

    When businesses within a VAT Group transact with each other, VAT is not charged on these transactions. This helps improve cash flow and simplifies internal invoicing.

    3. Cost Savings on VAT-Related Expenses

    With fewer VAT filings and reduced transaction costs between group members, businesses can save money on VAT compliance. Additionally, hiring VAT consultants or accountants becomes more cost-effective when managing a single VAT account instead of multiple ones.

    4. Improved Cash Flow Management

    Since VAT is not charged on transactions within the group, businesses can manage their cash flow better and avoid unnecessary tax payments. This is especially helpful for businesses dealing with high volumes of transactions.

    5. Centralized VAT Management

    With VAT Group Registration, the representative member of the group manages VAT-related responsibilities. This ensures better control and oversight over tax compliance.

    6. Stronger Tax Position and Compliance

    By consolidating VAT compliance under one group, businesses reduce the risk of individual VAT errors and ensure that they meet regulatory requirements in a streamlined manner. The Federal Tax Authority (FTA) views VAT Groups as structured entities, reducing the chances of audits or compliance issues.

    How Shuraa Tax Can Assist with VAT Group Registration

    VAT Group Registration in the UAE is a smart choice for businesses with multiple entities under common ownership. It simplifies tax filing, reduces administrative work, and helps businesses save money by avoiding VAT on transactions between group members. Instead of managing separate VAT accounts for each entity, companies can file one VAT return for the entire group, making tax compliance easier and more efficient. Additionally, VAT grouping improves cash flow management by eliminating unnecessary VAT payments within the group.

    However, businesses must meet specific eligibility criteria and follow the correct process to register successfully. This can sometimes be complex, requiring accurate documentation and compliance with Federal Tax Authority (FTA) regulations.

    At Shuraa Tax, we provide end-to-end assistance with VAT Group Registration, from checking your eligibility and preparing documents to submitting the application and ensuring compliance with UAE tax laws. Our team of VAT experts will guide you through the process, help you avoid penalties, and provide ongoing VAT support to keep your business tax compliant.

    Get in touch with Shuraa Tax today for expert guidance on VAT Group Registration in the UAE.

    FAQs

    1. What is VAT Group Registration?

    VAT Group Registration in UAE allows multiple businesses under the same ownership to register as a single entity for VAT purposes. This simplifies VAT compliance, reduces administrative tasks, and eliminates VAT on transactions between group members.

    2. Who is eligible to apply for VAT Group Registration?

    UAE businesses with shared ownership or control, such as parent-subsidiary relationships, and those that are VAT-registered or eligible for VAT registration, can apply. All members must be conducting taxable activities in the UAE.

    3. How does VAT Group Registration benefit my business?

    It reduces paperwork by consolidating VAT returns, improves cash flow by eliminating VAT on internal transactions, and centralizes VAT management under one representative member, saving time and costs on tax compliance.

    4. How can I apply for VAT Group Registration?

    To apply, businesses must be VAT-registered, meet the eligibility criteria, and submit an application through the Federal Tax Authority (FTA) e-Services portal with required documentation, including ownership proof and financial statements.

    5. What happens after applying for VAT Group Registration?

    After submission, the FTA will review the application. If approved, the VAT group will be issued a VAT Group Registration Number and must begin filing a single VAT return for the entire group.

  • VAT on Free Zones in UAE – Dubai

    VAT on Free Zones in UAE – Dubai

    Value Added Tax (VAT) has become an important part of running a business in the UAE since it was introduced in January 2018. With a standard rate of 5%, VAT applies to many goods and services, meaning businesses need to be aware of the rules and how to comply with them. One of the unique features of the UAE is its free zones.

    Free Zone is a term for free trade zones that encourage foreign ownership of businesses. Businesses in Free Zones must follow the rules set by the Free Zone Authority to do business in this area. Under UAE law, certain Free zones are known as “designated zones.” According to Article 51 of the Executive Regulations, the following meet the description of marked zones:

    • A particular geographic region that is enclosed and secured.
    • Security measures and customs rules are in place to keep track of who comes and goes and what moves in and out of the area.
    • It has internal rules about how things should be kept, stored, and worked on in the area.
    • The person in charge of the Designated Zone must follow the rules set by the FZ Authority.

    Therefore, any Free zone that satisfies the requirements and is listed on the cabinet’s list will be considered a Designated zone. Some of the famous free zones include IFZA, JAFZA, DIFC, and RAKEZ.

    While free zones provide great opportunities, they also have specific VAT rules that businesses need to understand, especially regarding VAT for free zone companies in UAE. For example, knowing the difference between designated and non-designated zones, what qualifies for zero-rated supplies, and the steps for VAT compliance can all affect a company’s finances. That’s why it’s essential for businesses operating in Dubai’s free zones to get a clear grasp of VAT implications.

    Is there VAT for Freezone Companies in the UAE?

    Yes, VAT can apply to Free Zone companies in the UAE, but it depends on several factors. Some people think that only limited companies can sign up for VAT in the UAE. Any business that meets the minimum requirement for VAT registration in the UAE must go through the FTA’s VAT registration process. A free zone company in the UAE can register independently if it makes between AED 187,500 and AED 375,000.

    For free zone companies, understanding whether they reach this threshold is crucial, as it determines their VAT registration requirements. If they exceed the threshold, they must comply with all VAT obligations, including charging VAT on their taxable supplies and filing regular VAT returns. This is an important aspect of VAT registration for free zone companies in UAE.

    Distinction Between Designated Zones and Non-Designated Zones

    One of the key concepts in VAT for free zone companies is the distinction between designated zones and non-designated zones.

    Designated Zones

    Designated free zones in the UAE are specific free zones that have been designated by the Federal Tax Authority (FTA) as being outside the territorial scope of the UAE for VAT purposes. This means that goods and services supplied within these zones are generally exempt from VAT.

    However, there are some exceptions:

    • Supply of Services to Mainland Businesses: If a free zone company supplies services to a mainland business, VAT is applicable at a standard rate of 5%.
    • Supply of Goods or Services to Non-Business Consumers: If a free zone company supplies goods or services to non-business consumers within the zone, VAT may be applicable.

    Non-Designated Zones

    On the other hand, non-designated zones do not enjoy the same VAT benefits as designated zones. Businesses operating in these areas are subject to the standard VAT rates. Therefore, it’s important for companies to know which category their free zone falls into to understand their VAT obligations better.

    VAT Treatment in the UAE Free Zones

    The standard VAT rate in the UAE Free Zone is set at 5%. This rate applies to most goods and services that do not qualify for any exemptions or special treatment. However, there are also zero-rates supplies and tax-exempt supplies.

    Tax-Exempt VAT

    Tax-exempt supplies are goods and services that are not subject to VAT. This means that businesses do not charge VAT on these supplies, and they also cannot claim any input tax credits on related purchases. Examples of tax-exempt supplies include certain healthcare and educational services.

    Zero-Rated VAT

    Zero-rated VAT means that the VAT rate charged on a good or service is 0%. Businesses can still recover the VAT incurred on their purchases related to these supplies. This treatment often applies to exports and specific goods and services that meet certain criteria. In designated free zones in the UAE, goods that are moved outside the zone may also qualify for zero-rated VAT.

    Specific VAT Treatments for Goods and Services within Free Zones

    The VAT treatment of goods and services in free zones can vary, with several important considerations:

    Import and Export

    In designated zones, imported goods can be stored without VAT until they are moved outside the zone. This can significantly reduce the cash flow burden for businesses. Exports from these zones are typically zero-rated, allowing companies to sell goods to international customers without adding VAT.

    Services

    When it comes to services, VAT may apply depending on the nature of the service and where it is supplied. For instance, services provided within a designated zone may not incur VAT, while services supplied to customers outside the zone might be subject to VAT.

    VAT Refunds

    Free zone companies may also be eligible for VAT refunds on certain expenses incurred within the zone. This can provide a financial advantage and enhance cash flow management.

    How to Register for VAT in UAE Free Zone?

    While most free zones in the UAE are designated zones, exempting them from VAT, some may require VAT registration depending on their specific activities and the nature of their supplies. Here’s a general process on how to register for VAT in a UAE Free Zone:

    1. Determine VAT Registration Requirement

    Not all free zones are designated. Designated zones are generally exempt from VAT. However, if you supply goods or services to non-business consumers within the zone or to entities outside the zone, you may need to register.

    Companies in non-designated zones are subject to VAT and must register if they meet the standard VAT registration threshold i.e. AED 375,000 per year. However, businesses below this threshold can still register voluntarily if they choose.

    2. Prepare Required Documents

    Gather the necessary documents before beginning the registration process. Commonly required documents include:

    • Trade license of the free zone company
    • Copy of the owner’s passport or identification
    • Proof of business address in the free zone
    • Bank account details
    • Financial statements (if applicable)
    • Information about taxable supplies and imports

    3. Access the Federal Tax Authority (FTA) Website

    Visit the official website of the Federal Tax Authority (FTA) of the UAE. This is the government body responsible for managing tax matters, including VAT registration.

    4. Create an Account on the FTA Portal

    If you do not already have an account, you will need to create one on the FTA portal. Click on the registration section and follow the instructions to set up your account. You’ll need to provide your email address and set a password for your account.

    5. Complete the VAT Registration Application

    Once logged in, navigate to the VAT registration section and fill out the application form. You’ll need to provide details about your business, including:

    • Business activities
    • Estimated annual turnover
    • Details about your free zone

    Ensure all information is accurate and complete, as any discrepancies can delay the registration process.

    6. Submit the Application

    After filling out the application form, review all the information and submit it through the FTA portal.

    7. Review and Approval

    The FTA will review your application. If they require any additional information or documentation, they will contact you. Upon approval, you will receive a Tax Registration Number (TRN).

    What happens if a company does not register for VAT?

    If a company that works in and out of a free zone in the UAE doesn’t register for VAT in time though required as per law, the FTA will register the business from the date it should have been registered for VAT.

    So, Businesses failing to comply with VAT registration rules will receive fines and must retroactively apply the correct VAT rate to all past sales. If your yearly sales hit the threshold, you can hire a licenced tax agent in the UAE to help you. This is very important if you don’t know when your business needs to be registered or if it has already reached the required size.

    VAT Registration in Freezone with Shuraa Tax

    Understanding VAT for free zone companies in UAE is essential for businesses operating in these areas. Whether you’re in a designated or non-designated zone, knowing the VAT rules helps you stay compliant, avoid fines, and make informed financial choices. Since VAT regulations can be tricky, it’s smart to get professional guidance to ensure your business follows all the rules.

    Shuraa Business Setup not only help business owners set up their companies in mainland, free zone, and overseas areas, but we also help you get our in-house finance teams ready for accounts reporting, auditing, UAE tax support like VAT, Corporate tax, Excise Tax, Tax Residency Certification.

    Our qualified tax team of advisors and UAE tax agents assist businesses to be UAE tax compliant and to have effective documentation which is required by UAE authority. Contact us today at +971508912062 or info@shuraatax.com to make the process simple and hassle-free.

    Frequently Asked Questions

    1. What is VAT for freezone companies in UAE?

    VAT for freezone companies in the UAE is the value-added tax that businesses operating in free zones must comply with, depending on whether they are in a designated or non-designated zone. The standard VAT rate in the UAE is 5%, but designated zones enjoy special VAT treatment, such as exemptions or zero-rated supplies for certain transactions.

    2. What are Designated Free Zones in UAE?

    Designated free zones are specific free zones that have been designated by the Federal Tax Authority (FTA) as being outside the territorial scope of the UAE for VAT purposes. This means that goods and services supplied within these zones are generally exempt from VAT.

    3. Do freezone companies need to register for VAT in the UAE?

    Yes, freezone companies must register for VAT if their taxable supplies and imports exceed AED 375,000 per year. Even if they don’t meet this threshold, companies can voluntarily register for VAT to benefit from input tax recovery on their purchases.

    4. How does VAT impact goods moving in and out of free zones?

    In designated free zones in UAE, goods moving in and out of these areas can be VAT-free, particularly when they are exported outside the UAE. However, if goods are transferred into the UAE mainland from a designated zone, VAT will be charged at the standard rate.

  • Documents Required for Corporate Tax Registration in UAE

    Documents Required for Corporate Tax Registration in UAE

    Corporate Tax is one of the biggest changes to business rules in the UAE, introduced on June 1, 2023. The aim is to bring the UAE in line with global tax practices while still keeping the rates attractive for businesses. Now, if you run a company in the mainland, a free zone, or even offshore, corporate tax registration with the Federal Tax Authority (FTA) has become a must.

    Registering on time is not just about following the law, it also helps you avoid penalties and shows your business is reliable and compliant. The whole process, however, depends on one key thing: having the right documents in place. If even one paper is missing or outdated, it can delay your registration and create unnecessary problems.

    Dealing with the legalities can be tricky, but you don’t have to do it alone. Shuraa Tax offers expert help with corporate tax services in UAE. We can guide you through everything, from essential documents required for corporate tax registration to filing your tax returns, to make sure your business is fully compliant.

    Who Needs to Register for Corporate Tax in UAE?

    Almost every business or person engaged in business activities in the UAE must register for Corporate Tax. This is a mandatory requirement to ensure compliance with the new tax laws.

    1. UAE-based businesses:

    This includes all companies, partnerships, and other juridical entities established in the UAE mainland and free zones. Even if a free zone company qualifies for a 0% tax rate, it still needs to register and get a Corporate Tax Registration Number (TRN).

    2. Foreign businesses:

    Non-resident companies must register if they have a “Permanent Establishment” in the UAE. This means having a fixed business presence, such as a branch, office, or long-term project.

    3. Individuals (Natural Persons):

    You might need to register if you’re an individual earning income from a business or freelance activity in the UAE and your annual turnover exceeds AED 1 million. This doesn’t apply to income from salaries, personal investments, or real estate (in your personal capacity).

    4. Exempted Persons:

    Even entities that are exempt from paying Corporate Tax, such as government bodies or qualifying public benefit organizations, may still be required to register with the Federal Tax Authority (FTA) to prove their exemption status.

    Note: Corporate tax is charged at 9% on profits above AED 375,000, while income up to AED 375,000 is taxed at 0% (to support small businesses and startups).

    Documents Required for Corporate Tax Registration in UAE

    When applying for corporate tax registration with the Federal Tax Authority (FTA), you’ll need to prepare and upload a set of documents. Each document plays an important role in proving your business’s identity, structure, and financial standing. Here’s a breakdown:

    1. Trade License Copy

    Your valid trade license is the most important document. It shows that your business is legally registered in the UAE and outlines the activities you are allowed to carry out. Make sure the license is renewed and up to date, as expired licenses can delay the registration process.

    2. Certificate of Incorporation (if applicable)

    This applies to certain types of businesses, such as companies incorporated in free zones or under specific laws. It’s proof that your company has been legally established and recognized by the authorities.

    3. Memorandum of Association (MOA) or Articles of Association (AOA)

    These documents explain the structure of your company, such as the roles of shareholders, shareholding percentages, and rules for company management. The FTA may need this to understand the ownership and control of the business.

    4. Lease Agreement / Ejari Certificate

    This serves as proof of your business address in the UAE. Whether it’s an office, warehouse, or shop, the FTA requires confirmation that your company has a registered physical location.

    5. Passport and Emirates ID Copies of Shareholders/Owners

    All major shareholders, owners, and sometimes directors need to provide valid passport copies and Emirates IDs (if they are UAE residents). This helps the FTA verify the individuals behind the business.

    6. Details of Directors and Managers

    Apart from the owners, you’ll need to submit details of people managing or controlling the business. This could include board members, directors, or managers authorized to make decisions on behalf of the company.

    7. Tax Registration Number (TRN) – If Registered for VAT

    If your business is already registered for VAT in the UAE, you’ll need to provide the VAT TRN certificate. It helps the FTA link your VAT and corporate tax records under one profile.

    8. Latest Audited Financial Statements (if available)

    While not mandatory for all businesses at the registration stage, submitting financial statements can support your application and help the FTA understand your company’s size and profitability. For larger businesses, this may become a requirement.

    9. Bank Account Details

    You’ll need to provide your company’s official bank account details, including the IBAN and account number. This ensures transparency and helps in linking financial transactions for tax purposes.

    10. Power of Attorney (if applicable)

    If someone else (like a tax consultant or PRO) is handling your corporate tax registration on your behalf, you’ll need to provide a notarized Power of Attorney. This document authorizes them to act for your business in front of the FTA.

    11. Approvals from Relevant Authorities (if required)

    Certain businesses in regulated sectors (like healthcare, education, or financial services) may need to submit approvals or licenses from their respective governing authorities. These are only required for specific industries.

    12. Group or Parent Company Details (if registering as a tax group)

    If your company is part of a bigger group or registering under the “tax group” scheme, you’ll need to provide:

    • Parent company details
    • Group ownership structure
    • Supporting documents linking subsidiaries

    This ensures the FTA recognizes the entire group as one tax entity where applicable.

    Note: It is highly recommended to have your financial statements ready. The FTA may request financial statements to determine your tax liability and to confirm your business’s financial status, especially if you are claiming a zero percent tax rate. These documents include the income statement, balance sheet, and cash flow statement.

    How to Register for Corporate Tax in the UAE?

    Here’s a simple step-by-step guide for corporate tax registration in the UAE:

    Step 1: Create an FTA Account

    Visit the official FTA website: tax.gov.ae If you don’t already have an account, create one by providing:

    • Email ID
    • Password
    • Security verification details

    You’ll receive a confirmation email to activate your account.

    Step 2: Log in to the FTA Portal

    Once your account is active, log in with your credentials. Go to the Corporate Tax section inside the portal.

    Step 3: Start a New Corporate Tax Registration Application

    Select “Register for Corporate Tax.” The system will generate an application form for you. Before starting, carefully read the FTA’s instructions on eligibility and compliance.

    Step 4: Fill in Basic Business Details

    You’ll need to enter:

    • Company name (as per license)
    • Trade license number and expiry date
    • Company type (mainland, free zone, offshore)
    • Legal structure (LLC, sole establishment, etc.)
    • Business activity

    Step 5: Provide Owner and Management Information

    Upload passport and Emirates ID copies of all shareholders/partners. Add details of directors, managers, or authorized signatories.

    Step 6: Enter Contact and Address Information

    Provide official company contact details (email, phone number). Enter your registered office address (lease/Ejari certificate details).

    Step 7: Upload Required Documents

    Attach all supporting documents, such as:

    • Trade license
    • MOA/AOA
    • Passport & Emirates ID copies
    • Bank account details
    • Financial statements (if available)

    Step 8: Review and Submit the Application

    Double-check all entered details and uploaded documents. Submit the application online through the portal.

    Step 9: FTA Review and Approval

    The FTA will review your application. If additional information is needed, they will notify you via email. Once approved, your Corporate Tax Registration Number (TRN) will be issued.

    Step 10: Maintain Compliance

    Keep your TRN safe as it will be required for filing returns. File corporate tax returns annually based on your financial year. Maintain accurate records to avoid penalties.

    Why Professional Assistance Can Help

    Getting your corporate tax registration right in the UAE starts with having the correct documents in place. It not only makes the process smoother but also ensures you avoid unnecessary delays or compliance issues later. The sooner you register, the smoother things will be for you in the long run.

    At Shuraa Tax, we’re here to make the process simple. From helping you collect the right papers to completing the registration, our team takes care of it all. Plus, we offer a full range of taxation services in the UAE, so whether it’s VAT, bookkeeping, audits, or compliance, we’ve got you covered.

    Reach out to Shuraa Tax today and let us take the stress out of corporate tax for you.

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

  • VAT For E-Commerce Businesses in UAE

    VAT For E-Commerce Businesses in UAE

    E-commerce in the UAE has been growing at lightning speed. Back in 2019, there were around 4.5 million online shoppers, and by the last year, this number jumped to 6.5 million (roughly a 20% increase). The retail sector itself is now worth about AED 306.6 billion. In 2024, the UAE’s e-commerce market reached AED 32.3 billion and is expected to cross AED 50.6 billion by 2029. A young, tech-savvy population, reliable internet, and fast delivery services are all driving this boom.

    But with this growth comes responsibility. Since January 1, 2018, the UAE has applied Value Added Tax (VAT) at a standard 5% rate, managed by the Federal Tax Authority (FTA). For e-commerce businesses, whether you sell products, digital services, or operate through marketplaces, it’s essential to know if there’s a VAT for e-commerce businesses in the UAE.

    This includes when you need to register, how to charge VAT, and how to handle cross-border sales.

    Staying VAT compliant protects your business from penalties, builds customer trust, and shows that you’re running a professional setup.

    VAT for E-commerce Businesses in the UAE

    E-commerce businesses in the UAE are fully covered under VAT regulations. Doesn’t matter if you’re selling physical products or digital services; VAT applies in most cases. Therefore, it’s important to know how it works in different situations.

    1. Online sales to UAE residents (B2C transactions)

    If you sell goods or services directly to individual customers in the UAE, you must charge the standard 5% VAT at checkout (once your business is registered for VAT). This applies to everything from clothing and electronics to subscriptions and e-learning platforms.

    2. Online sales to businesses (B2B transactions)

    For B2B e-commerce transactions within the UAE, the standard 5% VAT rate generally applies. The business selling the goods or services charges VAT to the business customer. The purchasing business, if it is VAT-registered, can typically reclaim this VAT as input tax in its own VAT return.

    The key difference in B2B transactions often comes into play in cross-border scenarios where the reverse charge mechanism may apply.

    3. Cross-border transactions (imports/exports)

    The VAT treatment for cross-border e-commerce depends on whether the transaction is an import or an export.

    • Imports into the UAE: Goods imported for sale online are subject to VAT at the point of import. The seller is responsible for accounting for this VAT, which may later be recovered if the goods are resold.
    • Exports outside the UAE: Sales to customers abroad are generally zero-rated, meaning VAT is not charged, but you must keep proper documentation to prove that the goods or services were exported.

    Who Needs to Register for VAT?

    Not every e-commerce business in the UAE has to register for VAT right away. It depends on your turnover (the total value of your taxable supplies and imports) in a 12-month period.

    1. Mandatory VAT Registration

    If your taxable turnover is AED 375,000 or more, you must register for VAT. This applies whether you’re an online store, marketplace seller, or even a freelancer running a digital service business.

    2. Voluntary VAT Registration

    If your turnover is AED 187,500 or more, you can choose to register voluntarily. This is useful for small e-commerce businesses that want to look more professional and be able to claim back VAT on business expenses.

    3. Marketplace Operators

    If you sell through online platforms or marketplaces, you should check whether VAT collection is your responsibility or handled by the platform. In most cases, the seller is responsible for VAT compliance, not the platform.

    4. Freelancers and Small Businesses

    Even if you’re just offering services online (like digital design, tutoring, or software subscriptions), the same VAT thresholds apply.

    VAT on E-commerce Transactions

    VAT applies differently depending on the type of product or service being sold online. Here’s a breakdown to make it simple:

    1. VAT on Sales of Goods Online:

    If you’re selling physical goods (like clothes, electronics, or home items) to customers in the UAE, you must charge 5% VAT at the point of sale. The same applies whether you’re selling through your own website, social media, or an online marketplace.

    2. VAT on Digital Services:

    Digital products and services are also taxable. This includes things like:

    • Online subscriptions (music, streaming platforms, etc.)
    • Software and mobile apps
    • Online courses and e-learning platforms
    • Digital consulting services
    • If your business offers these, you must add 5% VAT for UAE customers.

    VAT on Imported Goods Sold Online:

    When goods are imported into the UAE for online sale, VAT is charged at the point of import. The seller pays this VAT to customs but can often reclaim it later as input tax when filing returns. For the customer, the price they pay should already include the VAT.

    For Non-Registered Businesses: A business that is not VAT-registered must still pay the 5% VAT on the imported goods at customs before the goods are released. Since they are not VAT-registered, they cannot reclaim this tax.

    How VAT is Charged at Checkout:

    For e-commerce transactions within the UAE, VAT is usually added to the final bill at checkout. For example, if an item costs AED 100, the customer will pay AED 105 (including 5% VAT). Businesses must clearly show the VAT amount on the invoice or receipt to stay compliant.

    VAT Compliance Requirements for E-commerce Businesses

    Running an e-commerce business in the UAE means following certain VAT rules set by the Federal Tax Authority (FTA). Here’s what you need to keep in mind:

    VAT Registration:

    If your sales cross the mandatory threshold of AED 375,000, you must register for VAT. Registration is done online through the FTA portal.

    Issuing VAT-Compliant Invoices:

    Every sale must be supported by a proper VAT invoice. Invoices should clearly show:

    • Seller and buyer details
    • A unique invoice number
    • Item/service description

    Net price, VAT amount, and total price (including 5% VAT)

    Record Keeping:

    Keep detailed records of all sales, purchases, imports, and exports for at least 5 years (in some cases, 15 years for real estate). Proper bookkeeping helps in case of FTA audits.

    Filing VAT Returns:

    Most businesses need to file VAT returns quarterly (every 3 months). Returns must show total sales, VAT collected, and VAT paid on purchases (input VAT). Returns are submitted online through the FTA portal, and payment must be made before the deadline.

    Accounting for Cross-Border Sales:

    Ensure correct treatment for exports (usually zero-rated) and imports (VAT charged at customs). Keep proof of export to claim zero-rating.

    Note: VAT rules can change, especially for e-commerce and digital services. Regularly check FTA updates or work with a tax consultant to avoid mistakes.

    Penalties for Non-Compliance

    For e-commerce businesses, mistakes can quickly become costly. Here are some key penalties to be aware of:

    • Late VAT Registration: If you fail to register for VAT on time after crossing the mandatory threshold, the penalty can start from AED 10,000.
    • Late VAT Return Filing: Missing the VAT return deadline can result in penalties starting at AED 1,000 for the first time, and AED 2,000 for repeated delays within 24 months.
    • Late VAT Payments: If you don’t pay VAT on time, a percentage-based fine is applied (2% of unpaid tax immediately, 4% monthly, and up to 300% maximum).
    • Incorrect or Incomplete Records: Not keeping proper invoices, sales records, or import/export documents can lead to fines of AED 10,000 – AED 50,000, depending on the violation.

    How Shuraa Tax Can Help

    E-commerce is booming in the UAE, and following VAT rules is a big part of running a successful online business. Registering for VAT, VAT return filing on time, and keeping proper records not only helps you avoid fines but also shows customers that you run a trustworthy business.

    If you’re unsure where to start, don’t worry, you don’t have to do it alone. Shuraa Tax can guide you through the entire process, from VAT registration and compliance support to bookkeeping and VAT return filing. Reach out to Shuraa Tax today and let us make VAT simple for your business.

    Frequently Asked Questions

    1. Is VAT applicable to e-commerce businesses in the UAE?

    Yes. VAT for e-commerce business in the UAE applies just like traditional businesses. Most online sales and digital services are subject to 5% VAT.

    2. Do I need to charge VAT on digital services like subscriptions or e-learning?

    Yes, digital services are considered taxable supplies. If your business is VAT-registered and sells digital products to a customer in the UAE, you must charge the standard 5% VAT on the sale.

    3. Do freelancers or small online sellers need to register for VAT?

    Yes, if their turnover crosses AED 375,000. Below this, registration is voluntary but can still be beneficial.

    4. Do I need to charge VAT on online sales to customers in the UAE?

    Yes, VAT on online sales to UAE residents (B2C) is 5%, which must be added to the product or service price at checkout.

    5. How is VAT handled on imported goods sold online?

    A VAT-registered business pays the 5% VAT on imported goods at customs but can then reclaim this tax as input tax in its VAT return. The business then charges 5% VAT on the final sale to the customer.

  • UAE Tax Penalties: 2022 Guide with Latest Updates

    UAE Tax Penalties: 2022 Guide with Latest Updates

    Everyone knows that UAE used to follow a no-tax policy. However, the UAE government introduced Excise tax in 2017 and VAT in 2018. Ever since then, there has been a 5% VAT applicable to most goods and services. There are certain goods and services subject to a 0% rate or exemption from VAT. And just like any other country, you are entitled to pay the penalty if you delay the tax payment or violate any regulations.  

    Recently, the UAE government has made a few amendments to the Tax penalties. According to the new updates, each fine or penalty will be no less than AED 500 and can be no more than triple the tax value of the transaction in question. This blog will cover all the tax penalties with the latest updates and their benefits for taxpayers.  

    The UAE Tax Penalties with Latest Updates 

    Below mentioned is a detailed list of UAE tax penalties with the latest updates: 

    1. Fixed Penalties for Voluntary Disclosure  

    Trigger Old Amount New Amount 
    First Voluntary Disclosure AED 3,000 AED 1,000 
    Subsequent Voluntary Disclosure AED 5,000 AED 2,000 

    2. Late Payment Penalty for Under-Paid VAT as Per the Voluntary Disclosure or Tax Assessment 

    As per the new rules, taxpayers in the UAE will now be given up to 20 days to settle any unpaid or underpaid tax before any late payment tax penalties apply. The due dates for the calculation of the late payment penalty can be done this way: 

    1. 20 business days following the submission of a voluntary disclosure 

    2. 20 business days following the receipt of a Tax Assessment 

    Trigger Amount 
    Taxpayers fail to pay within the 20 days 2% 
    One Month from the Due Date 4% per month 
    CAP 300% 

    3. Variable penalty where a voluntary disclosure is submitted before the taxpayer is notified of an audit by the Federal Tax Authority (FTA) 

    As per the update, the penalty now ranges from 5% to 40%. However, that totally depends on when taxpayers submit the voluntary disclosure. 

    Year in which the error is disclosed New Amount Old Amount 
    Year 1 5% of the underpaid tax 5% of the underpaid tax 
    Year 2 10% of the underpaid tax 
    Year 3 20% of the underpaid tax 
    Year 4 30% of the underpaid tax 
    Year 5 or more 40% of the underpaid tax 
       

    4. Late payment penalty for failure to settle the stated VAT in the submitted VAT return 

    Trigger Old Amount New Amount 
    Day After Due Date 2% 2% 
    One Week After Due Date 4% 2% 
    One Month After Due Date  1% per day 4% per month 
    CAP 300% 300% 

    5. Variable penalty where a voluntary disclosure is submitted/tax assessment is received after the taxpayer is notified of an audit by the FTA 

    Here, the government has declared a significant increase in the penalties if the error is corrected after the taxpayer is notified of an audit. The previous penalty was 30% and 50% of the underpaid tax upon error discovered during an FTA audit. However, as per the new penalty, the taxpayer will now be charged 50% of the underpaid tax. Moreover, they will have to pay 4% of the underpaid tax per month from the due date of the VAT return till the payment of tax liability.

    Apart from these, the UAE government has extended the redetermination period of administrative penalties to 31st December 2022. Moreover, Non-UAE businesses can now claim a refund of VAT raised in the UAE under the business visitor refund scheme. This offers refunds to foreign businesses that do not have a place of establishment or a fixed establishment in the UAE, subject to the fulfillment of certain conditions. However, this refund is available only to foreign business visitors from an approved list of countries that provide the same reciprocal refunds. The minimum refund claim is AED 2,000 and can cover a period of twelve calendar months. 

    Other UAE Tax Penalties Reductions 

    In order to offer some relief to the taxpayers, the UAE government has imposed reductions in a few more tax penalties. They are as follows: 

    1. The penalty for late registration: reduced from AED 20,000 to AED 10,000. 

    2. The penalty for failing to submit a deregistration application on time:  reduced from AED 10,000 to AED 1,000 per month (capped at AED10,000). 

    3. The penalty for failing to display prices inclusive of VAT: brought down to AED 5,000 from AED 15,000. 

    4. The penalty for failing to issue a tax invoice or tax credit note: reduced from AED 5,000 to AED 2,500 

    How Do These Tax Penalties’ Amendments Benefit Businesses in The UAE? 

    These amendments in the tax penalties offer an incentive to businesses to review their overall filling positions. Moreover, they get the time to reveal any errors before they are notified of an audit.  

    The best part is that now taxpayers who have been subject to penalties can request a waiver or installment of penalties. Furthermore, they can choose between either disputing tax penalties through the TDRC and the Federal Courts or appealing for installment. 

    Partner With Shuraa for Tax Compliances 

    Although we are optimistic that after reading this blog, you’ve got a fair idea of all the tax penalties, we understand that it might get overwhelming. Since you already have a lot on your plate as an entrepreneur, keeping up with the legal stuff too can be challenging. But you cannot ignore the fact how important it is to comply with the tax regime. Therefore, we suggest that you get in touch with a tax agency. 

    Legal experts at Shuraa Tax Consultants and Accountants can advise and assist you. We ensure that your company follows all its obligations by filing your return on time. Also, we efficiently communicate with the FTA and legally represent you wherever and whenever required. 

    We have cordial ties with the ministry that enable us to stay in step with many commercial legislation and tax regulations applicable to the UAE. Moreover, we guarantee that your company is ready for potential economic repercussions. We will take care of everything for you. All you need to do is reach out to us on info@shuraatax.com or call us on +971 508912062 and focus on other important business matters at hand.