VAT and Corporate Tax are the two main taxes a UAE business needs to think about, and they're easy to conflate since both involve the Federal Tax Authority — but they tax completely different things, with separate registration requirements, rates and filing obligations.
Side-by-Side Comparison
Here's the direct comparison:
- What's taxed: VAT taxes the value added to goods and services at each stage of supply — it's a consumption tax ultimately borne by the end customer. Corporate Tax taxes your business's net profit.
- Rate: VAT is a flat 5% on applicable supplies. Corporate Tax is 9%, but only on taxable profit above the AED 375,000 tax-free threshold.
- Who collects it: VAT is collected from customers on sales and remitted to the FTA, with input VAT on business costs generally reclaimable. Corporate Tax is calculated on your own net profit and paid directly by the business.
- Registration threshold: VAT registration becomes mandatory once taxable turnover crosses a specific threshold. Corporate Tax generally applies more broadly, though many businesses pay 0% due to the profit threshold, Small Business Relief, or free zone qualifying income rules.
- Filing frequency: VAT returns are typically filed periodically (commonly quarterly, depending on your registration). Corporate Tax is filed annually based on your financial year.
Can You Owe Both at Once?
Yes — VAT and Corporate Tax are independent obligations, and many UAE businesses are registered for and pay both simultaneously once they cross the relevant thresholds. Being VAT-registered doesn't exempt you from Corporate Tax, and vice versa — each has to be assessed and filed separately based on its own specific rules.
Run Your Own Numbers
General comparisons only go so far — the right answer for you depends on your specific numbers. The Tax Assistant tool lets you check your own situation directly, free and in under a minute.