UAE tax glossary: Corporate Tax and VAT terms explained

This glossary explains terms that come up most often in UAE Corporate Tax, VAT and the procedures the Federal Tax Authority (FTA) applies to registration, filing, record keeping and penalties. Each entry is a plain-English summary of definitions and rules published by the FTA, the Ministry of Finance and in UAE federal tax legislation; it is general information, not tax advice, and the official texts prevail where they differ. Thresholds, dates and penalty amounts change, so check the current legislation before relying on any figure.

Corporate Tax terms

Corporate Tax

A federal tax on the net income or profit of companies and other businesses, imposed by Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (as amended) and applying to Tax Periods starting on or after 1 June 2023. Taxable Income is generally taxed at 0% up to AED 375,000 and at 9% on the portion above AED 375,000, with separate rules for Qualifying Free Zone Persons and for large multinational groups.

Related: What the AED 375,000 Corporate Tax threshold means for taxable income

Taxable Person (Resident Person and Non-Resident Person)

A person subject to Corporate Tax, which is either a Resident Person or a Non-Resident Person. Resident Persons include companies and other juridical persons incorporated or established in the UAE (including in a free zone), foreign companies that are effectively managed and controlled in the UAE, and individuals who conduct a Business in the UAE, although individuals are within scope only if their total business turnover exceeds AED 1 million in a calendar year (wages, personal investment income and real estate investment income do not count). Non-Resident Persons are within scope where they have a Permanent Establishment in the UAE, derive UAE-sourced income, or have another nexus in the UAE specified by Cabinet decision.

Permanent Establishment

A place of business or other presence in the UAE through which a Non-Resident Person carries on its business, such as a branch, office, factory or place of management, a building site or construction project lasting more than six months, or a person who habitually concludes or negotiates contracts on its behalf. A place used only for preparatory or auxiliary activities, such as storing or delivering the business's own goods, is generally not a Permanent Establishment, and independent agents acting in the ordinary course of their own business are generally excluded.

Related: How UAE Corporate Tax applies to branches of foreign companies

Accounting Income and Taxable Income

Accounting Income is the net profit or loss for a Tax Period shown in a business's standalone financial statements, prepared under accounting standards accepted in the UAE. Taxable Income is the income on which Corporate Tax is charged: it starts from Accounting Income and is adjusted for items such as exempt income, reliefs, non-deductible expenditure, transactions with Related Parties and Connected Persons, and Tax Loss relief.

Related: From accounting profit to taxable income: key UAE Corporate Tax adjustments

Tax Period and Financial Year

For Corporate Tax, the Tax Period is the Financial Year, or part of it, for which a Tax Return must be filed. The Financial Year is the Gregorian calendar year or the 12-month period for which the business prepares its financial statements, and a business can apply to the FTA to change its Tax Period.

Related: Determining your first UAE Corporate Tax period when your financial year end is not December

Small Business Relief

An election that allows a Resident Person to be treated as having no Taxable Income for a Tax Period if its Revenue is AED 3 million or less in that Tax Period and in every previous Tax Period, and other conditions are met. Qualifying Free Zone Persons and members of large multinational groups cannot elect for it, and while it applies, exemptions, reliefs, deductions and Tax Loss relief are not available. Under Ministerial Decision No. 131 of 2026, the threshold applies to Tax Periods ending on or before 31 December 2029.

Related: Small Business Relief extension to 2029

Qualifying Free Zone Person and Qualifying Income

A Qualifying Free Zone Person (QFZP) is a juridical person incorporated, established or registered in a UAE free zone that meets all the conditions in the Corporate Tax Law, including maintaining adequate substance in the UAE, deriving Qualifying Income, complying with the transfer pricing rules and not electing to be taxed at the standard rates. A QFZP pays Corporate Tax at 0% on its Qualifying Income and 9% on its other Taxable Income. One of the conditions is that its non-qualifying Revenue does not exceed the lower of 5% of its total Revenue or AED 5 million in the Tax Period.

Exempt Income and Participation Exemption

Exempt Income is income that is not taken into account when calculating Taxable Income, such as dividends received from UAE resident companies and qualifying income from a Participating Interest. Under the Participation Exemption, a Participating Interest is generally an ownership interest of at least 5% (or one that cost at least AED 4 million to acquire) in a company that the business has held, or intends to hold, for an uninterrupted period of at least 12 months, subject to further conditions, including how that company is taxed.

Tax Group

Two or more Taxable Persons treated as a single Taxable Person for Corporate Tax and represented by the Parent Company, which files the group's Tax Return. Broadly, all members must be UAE resident juridical persons, and the Parent Company must own, directly or indirectly, at least 95% of each Subsidiary's share capital, hold at least 95% of its voting rights and be entitled to at least 95% of its profits and net assets; no member may be an Exempt Person or a Qualifying Free Zone Person, and all members must have the same Financial Year and use the same accounting standards. VAT has its own, separate tax group rules.

Related: When two UAE companies can form a Corporate Tax group

Related Parties and Connected Persons

Related Parties are persons linked to each other by family or ownership, for example individuals related up to the fourth degree of kinship or affiliation, or entities where one owns 50% or more of, or Controls, the other, or where the same person owns 50% or more of, or Controls, both. Connected Persons are a business's owners, directors and officers and their Related Parties; payments or benefits provided to them are deductible only to the extent they correspond to Market Value and are incurred wholly and exclusively for the business, although businesses whose shares are traded on a recognised stock exchange, or that are regulated by a competent authority in the UAE, are outside this rule.

Arm's length principle and transfer pricing

Transactions and arrangements between Related Parties must produce results consistent with those that unrelated parties would have reached in a similar transaction under similar circumstances. The arm's length result is set using recognised transfer pricing methods, such as the comparable uncontrolled price method or the transactional net margin method, and the FTA can adjust Taxable Income where a result falls outside the arm's length range. The rules apply whether the Related Parties or Connected Persons are on the UAE mainland, in a free zone or abroad.

Transfer pricing documentation

The FTA may require a Taxable Person to file, with its Tax Return, a disclosure of its transactions and arrangements with Related Parties and Connected Persons. A master file and a local file must be maintained where the business's Revenue in the Tax Period is AED 200 million or more, or where it belongs to a multinational group with total consolidated group Revenue of AED 3.15 billion or more, and they must be submitted within 30 days of an FTA request.

Tax Loss relief

A Tax Loss is negative Taxable Income for a Tax Period. Tax Losses can be carried forward without a time limit and set off against future Taxable Income, but the set-off in any Tax Period is capped at 75% of that period's Taxable Income before loss relief. Losses incurred before Corporate Tax applied to the business cannot be used, and losses carried forward can be lost after an ownership change of more than 50% unless the business continues the same or a similar activity.

Related: How UAE Corporate Tax loss carry-forward works

General Interest Deduction Limitation Rule

A rule that caps the deduction of Net Interest Expenditure (interest expense in excess of taxable interest income) at the higher of 30% of adjusted EBITDA or a de minimis amount of AED 12 million, which is adjusted proportionally for Tax Periods longer or shorter than 12 months. Net Interest Expenditure disallowed under the rule can be carried forward and deducted in the following 10 Tax Periods, subject to the same limit, and the rule does not apply to banks, insurance providers or individuals doing business in the UAE.

Withholding Tax

Corporate Tax deducted at source from UAE-sourced income of a Non-Resident Person, to the extent that income is not attributable to its Permanent Establishment or other nexus in the UAE. The Corporate Tax Law sets the rate at 0%, and the Cabinet may set other rates for specified categories of income by decision.

Domestic Minimum Top-up Tax (DMTT)

A top-up tax, aligned with the OECD Pillar Two global minimum tax rules, that applies, subject to exclusions, to UAE entities of multinational enterprise groups with annual revenue of EUR 750 million or more in the ultimate parent's consolidated financial statements in at least two of the four financial years immediately before the year being tested. It applies to financial years starting on or after 1 January 2025 and is designed so that the effective tax rate on in-scope groups in the UAE reaches 15%.

VAT terms

Value Added Tax (VAT)

A tax imposed on the import and supply of goods and services at each stage of production and distribution, including deemed supplies, under Federal Decree-Law No. 8 of 2017 on Value Added Tax (as amended). The standard rate is 5%, and certain supplies are zero-rated or exempt.

Related: VAT and indirect taxation services

Taxable Supply

A supply of goods or services for consideration made in the course of business by a person in the UAE, other than an Exempt Supply. Zero-rated supplies are Taxable Supplies.

Zero-rated and exempt supplies

A zero-rated supply is a Taxable Supply charged at 0%, so the supplier can generally recover the related Input Tax; examples include certain exports, international transport, certain education and healthcare services, and the first supply of a residential building within three years of its completion. An exempt supply carries no VAT and the related Input Tax generally cannot be recovered; examples include certain financial services, other supplies of residential buildings, bare land and local passenger transport.

Input Tax and Output Tax

Output Tax is the VAT charged on a Taxable Supply, and Input Tax is the VAT paid or due on goods and services supplied to, or imported by, a business. The Payable Tax for a Tax Period is the total Output Tax less the total Recoverable Tax for that period, and Input Tax is recoverable only on goods and services used, or intended to be used, for Taxable Supplies or certain other specified supplies.

Reverse charge

A mechanism under which the recipient, rather than the supplier, accounts for VAT. It applies, subject to conditions, when a VAT-registered business imports goods or services for its business, and to certain domestic supplies set out in the VAT law or by Cabinet decision, such as crude or refined oil, natural gas and hydrocarbons supplied between registrants for resale or energy production. For goods and services imported on or after 1 January 2026, the business no longer has to issue a tax invoice to itself, but it must still account for the VAT and keep the supporting documents.

Designated Zone

An area specified by Cabinet decision as a Designated Zone for VAT purposes, which is treated as outside the UAE for VAT if it meets conditions such as being a fenced area with security and customs controls. The treatment has important limits: services supplied there, and goods supplied there for consumption, are generally treated as supplied in the UAE, and not every free zone is a Designated Zone.

Tax Invoice

A written or electronic document recording a Taxable Supply and its details, which a VAT-registered supplier must generally issue within 14 days of the date of supply. A simplified tax invoice with fewer details may be issued where the customer is not VAT-registered, or is registered and the consideration does not exceed AED 10,000, but not where the reverse charge applies. Businesses brought within the UAE Electronic Invoicing System must issue tax invoices as structured Electronic Invoices through that system, and the simplified-invoice rules do not apply to those invoices.

Mandatory and voluntary VAT registration

A person resident in the UAE must register for VAT if the total value of its taxable supplies and imports either exceeded the Mandatory Registration Threshold of AED 375,000 over the previous 12 months, or is expected to exceed it in the next 30 days, and must apply within 30 days of becoming required to register. A non-resident must register if it makes supplies in the UAE on which no other person is obliged to pay the VAT. Voluntary registration is available where taxable supplies or taxable expenses exceeded the Voluntary Registration Threshold of AED 187,500 over the previous 12 months, or are expected to exceed it in the next 30 days.

Related: When VAT registration is mandatory in the UAE and what voluntary registration involves

VAT deregistration

A registrant must apply to deregister within 20 Business Days if it stops making taxable supplies, or if its taxable supplies over 12 consecutive months fall below the Voluntary Registration Threshold and neither its supplies nor its taxable expenses are expected to exceed that threshold in the next 30 days. A registrant may also apply to deregister if its taxable supplies over the past 12 months were below the Mandatory Registration Threshold, but a business that registered voluntarily cannot apply within 12 months of its registration.

VAT Tax Period and VAT Return

The standard VAT Tax Period is three calendar months, although the FTA can assign a shorter or longer period. The VAT Return, which reports supplies, Output Tax and recoverable Input Tax for the period, must reach the FTA, together with payment of any VAT due, no later than the 28th day after the end of the Tax Period unless the FTA directs otherwise.

Related: VAT return errors: correction limits, deadlines and cost risks

Filing, records and penalties

Tax Registration Number (TRN)

A unique number the FTA issues to each person registered for tax purposes. A registrant must quote its TRN in its correspondence and transactions with the FTA and others as the tax law requires, including on tax invoices, tax credit notes and tax returns.

Related: Corporate Tax registration deadlines and why compliance matters

EmaraTax

The FTA's digital platform for its services, used for tax registration, filing tax returns, making payments, managing tax accounts and other services such as refund and Tax Residency Certificate applications.

Corporate Tax Return

The return a Taxable Person files with the FTA for each Tax Period, showing details such as its Taxable Income, any Tax Loss relief and tax credits claimed, and its Corporate Tax Payable. It must be filed no later than nine months after the end of the Tax Period, any Corporate Tax Payable is due by the same deadline unless the FTA sets another date, and a Tax Group files a single return through its Parent Company.

Related: Corporate tax services

Record keeping

For Corporate Tax, a Taxable Person must keep the records and documents that support its Tax Returns and allow its Taxable Income to be readily ascertained for seven years after the end of the Tax Period to which they relate. For VAT, businesses must keep records such as tax invoices, tax credit notes and records of imports and exports for the periods set by the Tax Procedures Law and its Executive Regulation: generally five years after the Tax Period to which they relate, and longer in specified cases such as a dispute with the FTA, a Tax Audit or an undecided refund claim. VAT records relating to real estate must be kept for 15 years after the end of the Tax Period.

Related: Corporate Tax records in the UAE: what to keep and for how long

Voluntary Disclosure

A form through which a taxpayer notifies the FTA of an error or omission in a Tax Return it submitted, a Tax Assessment issued to it, or a tax refund application it submitted. A Voluntary Disclosure is mandatory where the error caused the tax payable to be understated or a refund to be overstated, optional where the error went the other way, and generally cannot be submitted more than five years after the end of the relevant Tax Period. Where the error understates tax payable by more than AED 10,000, the Voluntary Disclosure must be submitted within 20 Business Days of becoming aware of it; an understatement of AED 10,000 or less must generally be corrected in the next Tax Return due instead.

Related: Fixing errors in a UAE Corporate Tax return: the voluntary disclosure process

Tax Audit

A procedure in which the FTA inspects a person's commercial records, information, data or goods to check compliance with the tax laws. The FTA must normally give at least 10 Business Days' notice, although it can enter premises without notice in limited cases, such as where it has serious grounds to suspect tax evasion. Generally, the FTA cannot conduct a Tax Audit or issue a Tax Assessment more than five years after the end of the relevant Tax Period, with exceptions in specified cases, including up to 15 years where tax evasion is involved.

Related: What the FTA asks for in a UAE VAT review

Reconsideration

A request asking the FTA to reconsider a decision it has issued about a person, stating the reasons, which must be submitted within 40 Business Days of being notified of the decision. The FTA must decide within 40 Business Days of receiving the request, which it can extend by 20 Business Days where necessary. A person who disagrees with the outcome can object to the Tax Disputes Resolution Committee within 40 Business Days of being notified of the FTA's reconsideration decision, but the objection is not accepted unless the tax concerned has been paid in full.

Administrative Penalties

Monetary amounts the FTA imposes for breaches of the Tax Procedures Law, a tax law or the Cabinet decisions issued under them, notified through an Administrative Penalties Assessment. The specific violations and amounts are set out in Cabinet decisions, which have been amended over time.

Related: Which Corporate Tax penalties apply in the UAE and what triggers each one

Tax Residency Certificate

A certificate issued by the FTA confirming that a person is a Tax Resident of the UAE, which can be requested for the purposes of a double taxation agreement or for other purposes. Applications are made through EmaraTax.