UAE VAT and corporate tax explained for freelancers and small businesses (2026)

The UAE charges VAT at 5%, and you must register once your taxable supplies pass AED 375,000 a year. Corporate tax is 0% on taxable income up to AED 375,000 and 9% above that. Many small businesses with revenue of AED 3 million or less can elect Small Business Relief, which now runs to tax periods ending on or before 31 December 2029, and freelancers working as individuals only fall into corporate tax once their business turnover passes AED 1 million in a calendar year.

This guide explains those rules in plain language for freelancers, sole traders and small company owners. It is general information, not tax advice. Tax rules in the UAE have changed several times since 2023, so always check the Federal Tax Authority (FTA) website or speak to a registered tax agent before you make a decision.

UAE business taxes at a glance

If you are still setting up, our guides on how to start a business in the UAE and business ideas in Dubai cover licences and options.

How does VAT work in the UAE?

VAT has applied since 2018 at a standard rate of 5%. If you are registered, you add 5% to your taxable sales, collect it from customers, subtract the VAT you paid on business costs, and pay the difference to the FTA. On an AED 10,000 invoice, for example, you would charge AED 500 VAT, for a total of AED 10,500. Our VAT calculator adds or removes VAT for you.

Some supplies are zero-rated (0%), which means VAT is charged at 0% but you can still recover VAT on related costs. Examples include exports outside the GCC VAT area, international transport, the first supply of new residential property and certain healthcare and education. Other supplies are exempt, such as some financial services, later sales or rentals of residential property, bare land and local passenger transport. Exempt sales do not let you recover the related VAT.

When do you have to register for VAT?

You must register if your taxable supplies and imports went over AED 375,000 in the previous 12 months, or you expect them to go over that figure in the next 30 days. You may register voluntarily if your supplies, imports or taxable expenses passed AED 187,500. Foreign businesses that make taxable supplies in the UAE have no threshold.

The threshold is based on turnover, not profit. A designer who invoices AED 32,000 a month crosses AED 375,000 within the year, even if their profit is much lower. Keep a running 12-month total so you know when you are close.

What changed in VAT in 2026?

Amendments to the VAT law took effect on 1 January 2026. Three changes are worth knowing:

• Businesses no longer need to issue self-invoices under the reverse charge mechanism, but must keep the supporting documents.
• Claims to recover excess refundable VAT must be made within five years, after which the right expires.
• The FTA can deny input tax recovery on purchases that were part of a tax evasion arrangement, so check your suppliers are genuine.

How does UAE corporate tax work?

Corporate tax applies to financial years starting on or after 1 June 2023. It covers UAE companies, free zone businesses, foreign businesses with a taxable presence, and individuals who run a business in the UAE above the turnover threshold.

The rate is 0% on the first AED 375,000 of taxable income and 9% on anything above. So if your company’s taxable income is AED 500,000, you pay nothing on the first AED 375,000 and 9% on the remaining AED 125,000, which is AED 11,250. Taxable income is broadly your accounting profit with some adjustments. Try our corporate tax calculator for a quick estimate.

Do freelancers have to pay corporate tax?

A freelancer or sole trader working in their own name (a natural person) only becomes subject to corporate tax when their total turnover from business activities in the UAE exceeds AED 1 million in a calendar year. Salary from employment, personal investment income and income from real estate investment that does not need a licence are not counted.

If you pass the AED 1 million mark, you must register by 31 March of the following year. For example, a UAE resident freelancer whose 2026 business turnover passes AED 1 million must register by 31 March 2027. The first period for individuals is the calendar year, and the return is due nine months after it ends.

Companies are different. A licensed company, including a single-owner company or a free zone entity, must register for corporate tax even if its income is small or it expects to pay nothing. Our guide to the UAE for digital nomads covers the wider picture for remote workers.

What is Small Business Relief and when does it end?

Small Business Relief lets an eligible resident business be treated as having no taxable income for a tax period, which also means simpler compliance. To qualify, your revenue must be AED 3 million or less in the current tax period and in every previous tax period.

When corporate tax started, the relief was set to end with tax periods ending on 31 December 2026. In August 2026 the Ministry of Finance extended it through Ministerial Decision No. 131, so it can now be claimed for tax periods ending on or before 31 December 2029. The AED 3 million threshold did not change.

Keep these points in mind:

• It is not automatic. You elect it in your corporate tax return for each period.
• You still need to register and file a return.
• Qualifying Free Zone Persons cannot use it, and neither can members of large multinational groups with consolidated revenue above AED 3.15 billion.
• In a year when you elect the relief, you cannot carry forward tax losses from that year.

Are free zone businesses tax free?

Not automatically. A free zone company that meets all the conditions to be a Qualifying Free Zone Person pays 0% on its qualifying income and 9% on other taxable income. If income from non-qualifying activities goes above the lower of 5% of total revenue or AED 5 million, the business can lose that status. Free zone businesses still have to register, keep proper accounts and file returns. If you mainly serve mainland customers, ask an adviser whether the free zone regime actually helps you.

What are the deadlines and penalties?

At a high level, these are the dates and fines most small businesses meet:

• Corporate tax registration for new companies: within three months of incorporation, for companies set up on or after 1 March 2024.
• Corporate tax registration for individuals: by 31 March of the year after turnover passes AED 1 million.
• Corporate tax return and payment: within nine months of the end of each tax period.
• Late registration: AED 10,000 for corporate tax, and AED 10,000 for VAT.
• VAT returns: filed monthly or quarterly, as the FTA assigns, with a late filing penalty of AED 1,000 for a first offence.
• Late payment: new rules under Cabinet Decision No. 129 of 2025, in force from 14 April 2026, replaced the old flat percentages with a charge reported at 14% a year, worked out monthly.

The FTA has run penalty waiver schemes in the past, and penalty amounts are updated from time to time, so check the FTA site for the current figures before you act.

How do you register on EmaraTax?

All FTA services run through EmaraTax, the FTA’s online portal, and you log in with UAE Pass.

1. Create or activate your UAE Pass account.
2. Log in to EmaraTax and create a taxable person profile.
3. Choose corporate tax or VAT registration and fill in your details.
4. Upload your trade licence (or passport and Emirates ID for individuals), and any other documents requested.
5. Submit and wait for your Tax Registration Number (TRN).

Individuals can also get help at Tas’heel centres for corporate tax registration.

What records do you need to keep?

For corporate tax, keep your records and supporting documents for seven years after the end of the tax period they relate to. For VAT, keep tax invoices, credit notes, import documents and your VAT records, as the FTA can ask for them during an audit. A simple habit helps: keep every invoice you issue and receive, keep business and personal bank accounts separate, and reconcile monthly.

Is e-invoicing coming for small businesses?

Yes. The Ministry of Finance has announced a phased rollout of mandatory e-invoicing through accredited service providers. Businesses with annual revenue of AED 50 million or more go live on 1 January 2027. Businesses below AED 50 million must appoint a provider by 31 March 2027 and go live on 1 July 2027. Watch the FTA and Ministry of Finance announcements for the final details.

Can tourists get a VAT refund?

Yes. Visitors who shop at stores in the Tax Refund for Tourists scheme can get back most of the VAT they paid when they leave the UAE, after validating their purchases at the airport or border crossing. A small fee per purchase is taken off the refund. Official pages have recently shown slightly different refund percentages and fees, so check tax.gov.ae before you travel. If you pay by card, our post on using credit cards in the UAE may help.

Small business tax checklist

1. Track your 12-month taxable turnover against the AED 375,000 VAT threshold.
2. Register your company for corporate tax within three months of getting your licence.
3. If you are a freelancer in your own name, track your calendar year turnover against AED 1 million.
4. Decide each year whether to elect Small Business Relief in your return.
5. Keep records for at least seven years and separate business and personal money.
6. Put your return deadlines in your calendar and check tax.gov.ae for updates.

Looking for a desk to run your business from? See our list of co-working spaces in Dubai.

Last checked: October 2026. Rules and fees in the UAE change; confirm on the official pages above before you rely on them.