Corporate Tax vs VAT in the UAE (2026): The Difference Explained
Corporate tax and VAT are two entirely separate UAE taxes, and most businesses are subject to both. Corporate tax is a 9% tax on your business profits above AED 375,000, calculated once a year and paid from your own money. VAT is a 5% tax on your sales, collected from your customers on the government's behalf and filed quarterly or monthly. They have separate registrations, separate TRNs, separate returns and separate deadlines — being registered for one does nothing for the other.
The two taxes side by side
| Corporate tax | VAT | |
|---|---|---|
| What is taxed | Business profit (taxable income) | Sales of goods and services |
| Rate | 0% up to AED 375,000 of profit, 9% above | 5% standard, with some supplies zero-rated or exempt |
| Who bears the cost | The business | The end customer; the business only collects it |
| Registration trigger | All companies, plus natural persons above AED 1 million of business turnover | Mandatory above AED 375,000 taxable turnover, voluntary from AED 187,500 |
| Filing frequency | Once per year, within 9 months of the financial year end | Quarterly (monthly for larger businesses), within 28 days of each period end |
| Introduced | Financial years from 1 June 2023 | 1 January 2018 |
| Governing law | Federal Decree-Law No. 47 of 2022 | Federal Decree-Law No. 8 of 2017 |
The AED 375,000 confusion
The same number appears in both regimes and means completely different things — and this coincidence causes more confusion than anything else in UAE tax.
In VAT, AED 375,000 is a turnover threshold: once your taxable sales in 12 months exceed it, VAT registration is mandatory. In corporate tax, AED 375,000 is a profit band: the first AED 375,000 of taxable income is taxed at 0%, and 9% applies above it.
The consequences of mixing them up run in both directions. A business with AED 2 million of sales and AED 200,000 of profit must register for VAT (turnover above the VAT threshold) and pays zero corporate tax (profit inside the 0% band) — but still must register and file a corporate tax return first return, step by step →. A consultant with AED 350,000 of sales and AED 300,000 of profit is below the mandatory VAT threshold and below the corporate tax 0% ceiling — and may still have corporate tax registration obligations depending on turnover across the calendar year natural persons →.
One EmaraTax account, two registrations
Both taxes live in the same EmaraTax portal, under the same taxable person profile — but they are separate registrations producing separate TRNs registration walkthrough → how to set up your EmaraTax account →.
A VAT TRN from 2018 does not register you for corporate tax; thousands of long-VAT-registered businesses discovered this through the AED 10,000 corporate tax late registration penalty waiver route →.
Different money, different behaviour
The deepest difference is whose money is involved.
VAT is not your money. The 5% you add to invoices belongs to the FTA from the moment you collect it — your return nets what you collected against what you paid on purchases and remits the difference. Treating collected VAT as working capital is how VAT businesses get into trouble.
Corporate tax is your money. It is a genuine cost, calculated on profit after deductible expenses how to calculate corporate tax, with worked examples →, and it rewards accurate accounting: every legitimately deducted expense reduces it, and reliefs like Small Business Relief can bring it to zero for eligible businesses through 2029 Small Business Relief →.
Why the FTA sees both together
The two filings describe the same business from two angles, and the FTA cross-checks them. Revenue declared for VAT that does not reconcile with revenue in the corporate tax return is exactly the mismatch that risk-based audit selection is built to catch FTA tax audit process →.
Reconciling your own VAT and corporate tax figures annually — before filing — is the cheapest audit protection available.
Common questions of obligation
"I'm VAT registered — do I need corporate tax?" Yes, registration and filing are independent obligations.
"My profit is under AED 375,000 — do I ignore corporate tax?" No — the rate is 0% but registration and the annual return remain mandatory.
"I'm below the VAT threshold — do I still file corporate tax?" Yes, if you are within the corporate tax regime. The thresholds are unrelated.
"Do free zone companies pay VAT?" VAT applies in free zones (with special rules for Designated Zones on goods); the 0% corporate tax rate for Qualifying Free Zone Persons is a separate regime with its own conditions qualifying income →.
We prepare corporate tax returns from AED 499.
Fixed fees, every return reviewed by a qualified tax advisor, filed on EmaraTax before your deadline.