VAT (Value Added Tax) has been active in the UAE since 2018, charged at a flat 5% on most goods and services. While that sounds simple, the compliance requirements can trip up startups and small businesses managing cash flow and invoicing. In this UAE tax guide for business owners, we break down exactly what VAT means in practice so you can avoid missteps and stay ahead of the curve. What Triggers VAT Registration in the UAE? If your annual taxable turnover exceeds AED 375,000, VAT registration is mandatory. Businesses with turnover over AED 187,500 may voluntarily register, which can be strategic if you want to claim input VAT.  You’re required to register, file returns, and, when needed, deregister, even if you're winding down your business. Deregistration isn't automatic and comes with its own requirements and deadlines.  VAT Deadlines, Filing, and Fines 

• Registration: Within 30 days of crossing the mandatory threshold 

• Filing: Quarterly (based on license date) 

• Penalties: 

• Late registration: AED 10,000 

• Late filing: AED 1,000 (first time), AED 2,000 (repeat) 

• Late payment: 2% monthly, escalating over time 

• Late Deregistration Penalty: AED 10,000 for not applying within 20 days of being ineligible. 

• Filing Errors: Penalties ranging from AED 3,000 to AED 5,000 for incorrect VAT returns. 

• Unpaid Liabilities: Accumulation of interest on unpaid VAT liabilities. 

Whether you’re registering for the first time or closing your company, VAT compliance remains a critical element of this UAE tax guide for business owners and sustainable business strategy overall.   

Introduced in 2023, the UAE’s federal Corporate Tax (CT) is set at 9% on net profits exceeding AED 375,000/year. But here’s the key point: registration and filing are required even if your profits fall below the threshold. This UAE tax guide for business owners highlights that tax compliance is about transparency, not just payment. Who Needs to File? Almost every business, regardless of profit level, must register and file. The penalties for ignoring this are steep: 

• Late Registration: AED 10,000 if you miss the 90-day window post-incorporation 

• Late Filing: AED 500/month, capped at AED 5,000 

• Late Filing After Closure: Penalties may still apply even after dissolution! If you are shutting down, you still have to register, file your final returns, and close your tax accounts to avoid post-closure liabilities.  

Who’s Exempt and Who Isn’t? The following entities enjoy full exemption: 

• Government and government-controlled entities 

• Extractive industries 

• Certain qualifying investment funds 

If you’re operating in a Free Zone, you may still qualify for 0% CT but only if you: 

• Perform “qualifying activities” (as defined by the FTA) 

• Meet economic substance requirements 

• Keep non-qualifying income within the de minimis threshold 

Failing any of the above means losing the 0% benefit and becoming subject to the full 9% CT.  Overlooking these basics can lead to steep penalties, which is why this UAE tax guide for business owners emphasizes early planning and accurate reporting. 

Taxation in the UAE is now more than a formality; it's a test of business credibility. This UAE tax guide for business owners emphasizes that your compliance status impacts: 

• Access to Free Zone tax benefits 

• Eligibility for Golden Visa programs 

• M&A readiness and investor confidence 

• Your financial reputation 

At Kitaab, we specialize in helping startups, SMEs, and solo founders navigate UAE tax compliance without stress. 

• VAT registration, filing & deregistration 

• Corporate Tax planning, filing & QFZP qualification 

• Tax compliance for businesses closing down 

Whether you're launching, growing, or winding down, this UAE tax guide for business owners is your starting point for smart, penalty-free operations.  Speak to experts today   

Disclaimer: This blog is intended for general informational purposes only and does not constitute legal, tax, or accounting advice. While we strive to ensure accuracy, readers are encouraged to refer to the official update and consult with qualified advisors or the UAE Federal Tax Authority for guidance specific to your circumstances.