Getting a trade licence is the exciting part. The less visible part starts the day after: tax registrations with their own deadlines, a first financial year that may not be twelve months long, and records the Federal Tax Authority (FTA) can ask for years later. The rules are manageable, but they are specific, and a missed registration costs money even when no tax is due.
In short
- A UAE company, free zone companies included, must register for Corporate Tax within 3 months of its incorporation date, even if it expects to pay nothing.
- An individual running a business becomes subject to Corporate Tax only when total turnover from all their business activities passes AED 1 million in a calendar year, and even then tax is not necessarily payable.
- VAT registration becomes mandatory above AED 375,000 of taxable supplies and imports over 12 months, and the application is due within 30 days.
- Keep your books from day one: Corporate Tax records must be kept for 7 years after the end of the tax period, even if no tax is payable.
Corporate Tax for a new company: register first, count later
A company must apply for Corporate Tax registration within three months of its incorporation date. Missing that deadline carries a fine of AED 10,000. The FTA has said it will waive the fine for first-period filers who submit their first tax return within seven months of the period’s end instead of the usual nine, but that is a rescue option, not a plan.
Your first tax period normally follows your first financial year, which for a new company can run anywhere from 6 to 18 months. The tax return and any tax due must both be filed within nine months of the period’s end. For most companies the rate is 0% on taxable income up to AED 375,000 and 9% above it. These thresholds are not pro-rated if your first period is shorter or longer than twelve months.
Small Business Relief can bring the tax to zero for a company whose revenue stays at or below AED 3 million in the current tax period and in every previous one, for periods ending on or before 31 December 2029. It is an election, not an automatic exemption: you still register, keep books and file the return. It is not available to qualifying free zone persons or to members of a large multinational group (companies in two or more countries with consolidated group revenue of AED 3.15 billion or more).
Sole proprietors and freelancers: a different test
An individual who runs a business in their personal capacity, including a sole proprietor, becomes subject to Corporate Tax only when the total turnover from all their business activities exceeds AED 1,000,000 in a calendar year. The line is counted across all of the person’s businesses, not separately for each licence. Wages are never counted. Nor is income from personal investments or real estate investment, as long as it is earned for your own account, is neither run through nor requires a licence, and (for personal investments) is not a commercial business under UAE commercial law.
Below the line there is nothing to register. Above it, registration is due by 31 March of the following year, and the same AED 10,000 fine applies if it is missed. Being subject to the tax does not mean tax is always payable: the 0% band still applies to the first AED 375,000 of taxable income. This test is for individuals only; a separately incorporated company, even with one owner, follows the company rules above.
VAT: the threshold that arrives quietly
For a business based in the UAE, VAT registration is generally mandatory when the total value of your taxable supplies and imports exceeds AED 375,000 over the previous 12 months, or is expected to exceed it within the next 30 days. Imports matter if you buy goods or services from abroad, not only if you sell. The application is due within 30 days of the obligation arising, and late registration is fined AED 10,000.
Zero-rated sales, such as qualifying exports of services, still count toward the threshold. A business making only zero-rated supplies may apply to the FTA for an exception from VAT registration; the exception is not automatic. Voluntary VAT registration is possible if either the total value of taxable supplies and imports, or the value of taxable expenses, exceeds AED 187,500 over the previous 12 months or is expected to exceed that threshold in the next 30 days. This helps if you carry large start-up costs.
After registration, the standard tax period is three months, and both the return and the payment are due within 28 days of the period’s end. A late return costs AED 1,000, rising to AED 2,000 for a repeat within 24 months, and unpaid tax accrues a penalty at 14% per year, charged monthly.
Bookkeeping that survives a review
Corporate Tax starts from your accounting profit, so the books come first. Businesses with revenue up to AED 3 million may use the cash basis of accounting. Others apply IFRS, and IFRS for SMEs is available up to AED 50 million of revenue. For Corporate Tax purposes, a taxable person that is not a Tax Group must prepare audited financial statements if its revenue exceeds AED 50 million, and Qualifying Free Zone Persons must prepare them regardless of revenue. Tax Groups are subject to separate audited financial statement requirements. Keep supporting records for at least 7 years after the end of the tax period for Corporate Tax, and for at least 5 years for VAT (15 years for VAT records relating to real estate).
Common mistakes
- Assuming zero tax means no registration. The 0% band changes the tax, not the duty to register.
- Starting the clock late. For a new company the three months run from the incorporation date, not from the day the bank account opened or the first invoice went out.
- Confusing the two thresholds. AED 1 million is the Corporate Tax line for individuals; the VAT line is AED 375,000.
- Mixing personal and business money, which makes turnover hard to prove.
A short checklist
- Note your incorporation date and set a reminder before month 3.
- Agree the length of your first financial year and the year-end with your accountant.
- Track turnover monthly against AED 375,000 (rolling 12 months, VAT) and, if you operate as an individual rather than through a company, AED 1 million of total business turnover (calendar year, Corporate Tax).
- Open a separate business bank account from the first day.
- Store invoices, contracts and bank statements in one place: keep Corporate Tax records for 7 years after the end of the relevant tax period, even if no tax is payable, and VAT records for at least 5 years after the tax period (15 years if they relate to real estate).
Rules current as of 28 October 2026 – UAE company and tax law changes fairly often, so double-check timelines before relying on dates here.
Setting up the books and the filing calendar in month one is far cheaper than reconstructing a year of records later. If you would rather hand it over, accounting and bookkeeping services for new UAE businesses can take bookkeeping and filings off your plate.
