VAT vs Corporate Tax in the UAE: What's the Difference?
VAT is a 5% tax on consumption; corporate tax is a 0–9% tax on profit. They are two separate taxes, with separate registrations, thresholds and deadlines — here is how they compare and which ones apply to you.
UAE business owners routinely mix up the two federal taxes, and the confusion is understandable — both are run by the Federal Tax Authority (FTA), both live on the same EmaraTax portal, and both use a "TRN". But they tax completely different things, trigger on different thresholds and fall due on different dates. Getting them straight is the difference between clean compliance and avoidable penalties. This guide lays the two side by side.
What's the difference between VAT and corporate tax?
VAT (Value Added Tax) is a tax on consumption — a 5% charge you add to most sales and pass on to the FTA, in force since 1 January 2018. Corporate tax is a tax on profit — 0% on the first AED 375,000 of taxable income and 9% above, in force for financial years starting on or after 1 June 2023. In one line: VAT is charged on what you sell, corporate tax is charged on what you earn. They are separate registrations with separate tax registration numbers, and being registered for one does not register you for the other.
Side-by-side comparison
| VAT | Corporate tax | |
|---|---|---|
| What it taxes | Consumption (your sales) | Net profit (taxable income) |
| Rate | 5% standard (plus 0% and exempt categories) | 0% up to AED 375,000, 9% above |
| In force since | 1 January 2018 | Financial years from 1 June 2023 |
| Who registers | Businesses over the turnover threshold | All companies; individuals over AED 1M turnover |
| Registration threshold | Mandatory AED 375,000; voluntary AED 187,500 (taxable turnover) | No turnover threshold for companies |
| Return frequency | Quarterly (monthly for large businesses) | Once a year |
| Deadline | 28th of the month after the tax period | 9 months after the financial year-end |
| Governing law | Federal Decree-Law No. 8 of 2017 | Federal Decree-Law No. 47 of 2022 |
VAT: a tax on consumption
VAT is added to your taxable sales at 5%, and you reclaim the VAT you paid on business purchases — you remit the difference to the FTA. You must register once your taxable turnover over the past 12 months crosses AED 375,000, with voluntary registration available from AED 187,500. Returns are filed quarterly for most businesses (monthly for large ones) and are due by the 28th of the month following the tax period. The full mechanics — thresholds, the EmaraTax process, filing and the rules that catch people out — are in our UAE VAT registration and filing guide.
Corporate tax: a tax on profit
Corporate tax applies to your profit, not your revenue. The first AED 375,000 of taxable income is taxed at 0% and the rest at 9%, so a company with AED 500,000 of taxable income pays AED 11,250. Unlike VAT, there is no turnover threshold to register: every company must register regardless of profit, and individuals must register once business turnover passes AED 1,000,000 a year. The return is filed once a year, within nine months of your financial year-end. The complete picture — rates, registration, deadlines, Small Business Relief and penalties — is in our complete UAE corporate tax guide.
Do I need to register for both?
Often, yes — but on their own triggers. Corporate tax registration follows from simply being a company (or an individual doing business over AED 1M turnover), so most UAE businesses register for it. VAT registration depends on your taxable turnover crossing AED 375,000. A small company under the VAT threshold still registers for corporate tax; a high-turnover but low-margin trader may register for both. They are two separate applications on EmaraTax, each with its own TRN, its own return and its own deadline — never assume one covers the other.
Which applies to my business?
- Turnover under AED 375,000, a company: corporate tax registration yes (file, likely 0% or Small Business Relief); VAT optional (voluntary from AED 187,500).
- Turnover over AED 375,000: both — VAT mandatory, plus corporate tax.
- Freelancer / sole establishment: VAT once taxable turnover passes AED 375,000; corporate tax once business turnover passes AED 1,000,000.
- Free zone company: both still apply — a Qualifying Free Zone Person may pay 0% corporate tax on qualifying income but still registers and files, and VAT follows the same turnover rules as anyone else.
How QuickTax helps
Two taxes, two sets of deadlines, one portal — and one penalty regime waiting for a slip. QuickTax handles both: VAT registration and quarterly returns, corporate tax registration and the annual filing, all from clean IFRS books, so nothing falls between the two.
See how our accounting and tax service works →
This material is for reference and is not tax advice. Always verify current requirements on the official resources of the FTA and the UAE Ministry of Finance.
What this means for you
The two taxes look similar from the outside but work on opposite sides of your business — one on sales, one on profit. Keep three things straight:
VAT taxes sales, corporate tax taxes profit
VAT is 5% added to what you sell; corporate tax is 0–9% on what you earn. One is collected from customers, the other comes off your bottom line.
Separate registrations, separate deadlines
Two applications on EmaraTax, two TRNs, two returns — VAT by the 28th of the month after each period, corporate tax nine months after year-end. Never assume one covers the other.
Different triggers
Corporate tax applies to nearly every company regardless of turnover; VAT only once taxable turnover passes AED 375,000. Many small companies register for corporate tax but not — yet — VAT.
Frequently asked questions
Do I pay both VAT and corporate tax in the UAE?
Often yes, but they trigger separately. Corporate tax applies to almost every company (and to individuals with business turnover over AED 1,000,000 a year), while VAT applies once your taxable turnover passes AED 375,000. A small company under the VAT threshold still pays corporate tax; a higher-turnover business pays both. They are two separate obligations, not one.
Is corporate tax registration the same as VAT registration?
No. They are separate registrations on EmaraTax, each with its own tax registration number, its own return and its own deadline. VAT registration depends on turnover; corporate tax registration applies to companies regardless of turnover. Holding a VAT TRN does not mean you are registered for corporate tax, or vice versa.
Can I be registered for corporate tax but not VAT?
Yes, and it is common. A company below the AED 375,000 VAT threshold still must register for corporate tax, because corporate tax has no turnover threshold for companies. You would file an annual corporate tax return but no VAT returns until your taxable turnover crosses the VAT threshold.
Which costs more, VAT or corporate tax?
They are not directly comparable — VAT is 5% of your sales value (collected from customers and offset by the VAT you pay on purchases), while corporate tax is up to 9% of your profit. VAT is generally passed on to customers and is close to cash-flow neutral if managed well; corporate tax is a real cost on your bottom line, though the first AED 375,000 of profit is taxed at 0%.