Tax Management and Planning Guide in Dubai: Declarations, VAT Reports, and Legal Processes

Tax System and Basic Concepts in Dubai

Although the United Arab Emirates has long been known as a tax haven, it has implemented certain types of taxes within the framework of global transparency regulations. However, this system is still one of the most advantageous structures in the world.

Taxes Applied:

• Corporate Tax: Applied at a rate of 9% if net profit exceeds 375,000 AED.

• Value Added Tax (VAT): Applied at a rate of 5%; it is mandatory for companies with an annual turnover exceeding 375,000 AED.

• Withholding Tax, Income Tax, Capital Gains Tax: None.

Corporate Tax: Who Is Included?

The corporate tax that came into effect in Dubai as of June 2023 is particularly a line item that growing businesses need to pay attention to.

Tax Rates:

• 0% for the first 375,000 AED net profit

• 9% for net profit above 375,000 AED

Exempt Entities:

• Qualified Free Zone companies (those meeting certain criteria)

• Offshore companies

• Public institutions

• Charities

Tax Declaration Requirements:

• A declaration must be submitted within 9 months from the end of the financial year

• There is a requirement for digital declaration through the EmaraTax system

VAT Registration Obligations and Exemptions

In Dubai, VAT registration is determined based on the company’s annual turnover.

VAT Registration Thresholds:

• Mandatory Registration: 375,000 AED and above

• Voluntary Registration: Above 187,500 AED (can be advantageous)

VAT Application Areas:

• Sales of goods and services

• Digital products

• Consulting and freelance services

Areas Exempt from VAT:

• Education

• Health

• Certain financial services

• International transportation

Annual Declaration Processes: Dates and Documents

The declaration obligations of companies in Dubai are as follows:

VAT Declaration:

• Filing Period: Generally every 3 months

• Submission Process: Within 28 days from the end of the period

• Place of Declaration: EmaraTax system

Corporate Tax Declaration:

• Filing Duration: Within 9 months from the end of the financial year

• Mandatory Documents: Financial statements, income statement, balance sheet, bank statements

How to Prepare VAT Reports?

For accurate VAT reporting in Dubai:

• Income and expense invoices must be stored digitally

• VAT on expenses and VAT on sales should be netted to determine total payment or refund

• Automatic reporting should be generated through compatible accounting systems like Quickbooks

• The VAT declaration should be submitted from the online platform

VAT Refund Process:

• Companies engaged in zero-rated transactions (like exporters) can receive VAT refunds

• All documents requested by the FTA (Federal Tax Authority) for refunds must be submitted fully

Tax Compliance Process and Penalty Risks

When compliance with tax processes is not maintained, companies may face various penalties:

Possible Penalties:

• Late declaration penalty: Starts from 1,000 AED, increases when repeated

• Misleading declaration: 5,000 AED and above

• Failure to maintain records: 10,000 AED for the first violation, 20,000 AED for repeats

• Failure to declare: Major delays in corporate tax can lead to serious financial penalties

Strategies for Effective Tax Planning

Proper planning means not only protecting against penalties but also ensuring financial efficiency.

Recommended Steps:

• A strategy can be established to stay below the 375,000 AED threshold through profit planning

• Business models that generate VAT refund rights (such as exports) can be encouraged

• Expense documents must be fully and orderly retained

• An annual tax calendar should be created with systematic reminders

Tax Consultancy and Process Management with ORTAC

Obtaining expert support when planning taxes in Dubai protects your business from penalties and unnecessary costs.

The services we offer as ORTAC:

• Preparation of VAT and corporate tax declarations

• Setting up an integrated accounting system through Quickbooks

• Annual balance sheets, income-expenditure tracking, bank compliance reports

• Free zone compliance audit

• Tax strategy formulation and optimization consultancy

👉 To conduct your tax management professionally and ensure proper planning, contact us