Understanding how Corporate Tax and VAT differ is crucial for every Dubai company’s financial planning. Corporate Tax is a direct levy on net profits, with the first AED 375,000 taxed at 0% and any surplus taxed at 9% under the UAE Corporate Tax Law of 2023. Value Added Tax (VAT), introduced in January 2018, is an indirect consumption tax charged at 5% on most goods and services, borne by the end consumer but collected by businesses at the point of sale1.
Compliance requirements and reporting cycles vary significantly between the two regimes. Corporate Tax returns are assessed annually based on a company’s financial year, whereas VAT-registered businesses with taxable supplies over AED 375,000 must file returns—typically quarterly—and remit collected VAT to the Federal Tax Authority. Failure to align accounting processes with these distinct timelines can lead to penalties and cash flow challenges.
Key considerations include optimizing input tax recovery for VAT, structuring transactions to benefit from the AED 375,000 Corporate Tax threshold, and leveraging industry-specific exemptions or zero-rating provisions. How have you navigated registration thresholds, maintained accurate records, or adopted software solutions to streamline dual-tax compliance in your Dubai venture?
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