Quick Answer
The UAE currently charges four federal taxes that matter to most businesses: Corporate Tax (0% up to AED 375,000 of taxable income, 9% above that), VAT (5% on most goods and services), Excise Tax (50% to 100% on specific goods such as tobacco, energy drinks, and carbonated drinks), and customs duty (generally around 5% on imports from outside the GCC). Individuals pay 0% personal income tax on salaries and wages. Each tax has its own registration threshold, filing calendar, and penalty regime, so the right answer for your business depends on revenue, activity, and legal form.
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The Tax Types That Actually Apply to Your Business
The UAE is not a “zero-tax” country anymore. Since Corporate Tax took effect for financial years starting on or after 1 June 2023, most UAE businesses now deal with at least two federal taxes: Corporate Tax and VAT. Add Excise Tax if you deal in specific goods, and customs duty if you import, and a UAE company can easily be managing four separate compliance calendars at once.
This guide gives you the rate, threshold, and who-pays position for each tax type in one place. Each section below is intentionally a summary. For the compliance detail, penalty schedule, and step-by-step process on any single tax, follow the link to the dedicated guide.
Corporate Tax
Corporate Tax is a federal tax on business profits under Federal Decree-Law No. 47 of 2022. The rate is 0% on taxable income up to AED 375,000 and 9% on taxable income above that threshold. There is no upper limit, so a company with AED 2,000,000 in taxable profit pays 9% on AED 1,625,000 of it, a liability of AED 146,250. Qualifying Free Zone Persons can access a 0% rate on qualifying income only, with 9% still applying to non-qualifying income. Small businesses with revenue at or below AED 3,000,000 can elect Small Business Relief and be treated as having no taxable income for that period, a threshold the Ministry of Finance recently extended to cover tax periods ending on or before 31 December 2029. For the full registration process and deadlines, see Corporate Tax registration in the UAE, and for planning strategy, see our complete guide to Corporate Tax planning in Dubai.
Value Added Tax (VAT)
VAT is a 5% consumption tax charged at each stage of the supply chain under the VAT Decree-Law, introduced on 1 January 2018. Registration is mandatory once your taxable supplies and imports exceed AED 375,000 in the preceding 12 months (or are expected to exceed it in the next 30 days), and voluntary registration is available from AED 187,500. VAT is collected from customers and remitted to the FTA, so it is a cash-flow pass-through rather than a cost to the business, provided input VAT is properly recovered. Return and payment deadlines are assigned per tax period (monthly or quarterly depending on your registration) rather than fixed calendar dates, so always check the deadline shown on your own FTA account. For how specific transactions are classified, see how VAT transactions are treated in the UAE, and for full compliance support, see VAT consultancy services.
Excise Tax
Excise Tax targets specific goods considered harmful to health or the environment, under Federal Decree-Law No. 7 of 2017 and its Executive Regulation, Cabinet Decision No. 37 of 2017 (most recently amended by Cabinet Decision No. 108 of 2023). Rates are 50% on carbonated drinks, 100% on tobacco and tobacco products, 100% on electronic smoking devices and their liquids, and 100% on energy drinks. Sweetened drinks are taxed under a tiered structure tied to sugar content rather than a single flat rate. There is no revenue threshold for Excise Tax: any business that produces, imports, releases from a designated zone, or stockpiles excise goods must register before carrying out that activity, under Cabinet Decision No. 52 of 2019. For registration and filing, see Excise Tax registration in the UAE and Excise Tax return filing, and for how it compares directly to VAT, see Excise Tax vs VAT in the UAE.
Customs Duty
Customs duty is not administered by the FTA. It is charged by the relevant emirate’s customs department, typically at 5% of the CIF (cost, insurance, freight) value for most goods imported from outside the GCC, with higher rates on a small list of products (tobacco, for example, attracts additional customs duty on top of Excise Tax). Goods moving between GCC states generally clear customs once at the point of first entry. Companies operating from a free zone and re-exporting outside the UAE, or trading between free zones, can often structure around customs duty entirely, which is one of the reasons free zone status remains attractive despite Corporate Tax now applying UAE-wide.
Personal Income Tax and Other Charges
There is no federal personal income tax in the UAE. Salaries, wages, bonuses, and dividends paid to individuals are not taxed, regardless of nationality or residency status, as long as the income is not itself business income subject to Corporate Tax (for example, a natural person running an unincorporated business above the AED 1,000,000 threshold). Individuals working across borders may still need a Tax Residency Certificate to claim treaty relief in their home country; see our guide on UAE tax residency rules. Separately, individual emirates and municipalities levy their own charges, such as tourism dirham fees and percentage-based charges on hotel and restaurant bills. These are municipal or tourism charges, not federal taxes, and they are set and collected at the emirate level rather than by the FTA.
Comparing the UAE’s Tax Types at a Glance
| Tax Type | Rate | Threshold / Trigger | Who Pays |
|---|---|---|---|
| Corporate Tax | 0% up to AED 375,000; 9% above | Applies to nearly all UAE businesses; Small Business Relief available up to AED 3,000,000 revenue | Resident and qualifying non-resident businesses |
| VAT | 5% (standard rate) | AED 375,000 mandatory / AED 187,500 voluntary (taxable supplies) | Registered businesses; cost ultimately borne by the end consumer |
| Excise Tax | 50% to 100% depending on product | No revenue threshold; registration required before the taxable activity begins | Producers, importers, and stockpilers of excise goods |
| Customs Duty | Typically 5% of CIF value | Applies to most imports from outside the GCC | Importers of goods into the UAE mainland |
| Personal Income Tax | 0% | Not applicable | Individuals earning salary, wages, or dividend income |
| Municipal & Tourism Fees | Varies by emirate | Set locally, not federally | Hotel guests, tenants, and diners, collected by the operator |
Worked Example: One Company, Three Taxes
Take a Dubai mainland trading company with AED 2,800,000 in annual revenue and AED 500,000 in taxable profit for the financial year.
- Corporate Tax: revenue of AED 2,800,000 is below the AED 3,000,000 Small Business Relief threshold, so the company can elect relief and report AED 0 Corporate Tax for that period. Without electing relief, the standard calculation would be (AED 500,000 – AED 375,000) x 9% = AED 11,250 payable.
- VAT: annual taxable supplies of AED 2,800,000 exceed the AED 375,000 mandatory registration threshold, so the company must be VAT-registered and charge 5% on its standard-rated sales, recovering VAT paid on its own business expenses.
- Excise Tax: if this company also imports energy drinks for resale, it must separately register for Excise Tax and account for 100% Excise Tax on those goods, regardless of its revenue or Corporate Tax position.
This is why one company can be exempt from Corporate Tax in a given year while still being fully liable for VAT and Excise Tax at the same time. Each tax is assessed on its own rules.
Penalties Differ Across Each Tax Type
Treating these four taxes as one compliance job is a common mistake, because each one carries its own separate penalty regime, and missing one does not excuse the others. Late Corporate Tax registration can attract an administrative penalty of AED 10,000, the same headline figure the Ministry of Finance has applied to late tax registration generally, while late VAT registration carries its own AED 10,000 penalty on top of any VAT that should have been charged and remitted from the date registration was due. Excise Tax penalties can be more severe in practice, because failing to register before carrying out an excise activity, or under-declaring excise goods, is treated as a compliance failure on goods that are already taxed at 50% to 100%, compounding the exposure. Filing a return late, rather than registering late, triggers a further set of fixed and percentage-based penalties under each tax law. See the AED 10,000 late tax registration penalty and the full Corporate Tax penalty schedule for the exact figures that apply to each scenario.
Direct Tax vs Indirect Tax in the UAE
Corporate Tax is a direct tax: it is charged on profit and paid directly by the business that earns it. VAT and Excise Tax are indirect taxes: they are charged on transactions and collected from the customer, with the business acting as the collection agent for the FTA. Customs duty is also indirect, charged at the border rather than on income. Knowing which category a tax falls into matters for accounting treatment and for who ultimately bears the cost. For a fuller breakdown of this distinction with examples, see direct and indirect taxes under UAE Corporate Tax.
Frequently Asked Questions
How many types of taxes does the UAE have?
Four federal taxes apply broadly: Corporate Tax, VAT, Excise Tax, and customs duty. There is no personal income tax, no capital gains tax on personal investments, and no wealth tax. Individual emirates also levy their own municipal and tourism fees, which are separate from federal taxation.
Does the UAE have personal income tax?
No. Salaries, wages, bonuses, and dividends paid to individuals are not taxed by the federal government, regardless of the amount earned or the individual’s nationality.
What is the difference between VAT and Excise Tax?
VAT is a broad 5% tax applied to almost all goods and services at every stage of the supply chain. Excise Tax is a narrow, high-rate tax (50% to 100%) applied only to specific goods such as tobacco, energy drinks, and carbonated drinks, charged once at the point of production, import, or release from a designated zone.
Do free zone companies pay Corporate Tax?
Free zone companies are still within the Corporate Tax regime, but a Qualifying Free Zone Person can apply a 0% rate to its qualifying income while paying 9% on non-qualifying income. The distinction depends on the type of income and the activity, not simply the free zone location.
Is Small Business Relief still available?
Yes. The Ministry of Finance has extended the AED 3,000,000 revenue threshold for Small Business Relief to cover tax periods ending on or before 31 December 2029, so eligible small businesses can continue to elect it for the next several filing cycles.
Are customs duties the same as VAT?
No. Customs duty is charged once, at the border, when goods enter the UAE from outside the GCC, and is administered by the relevant emirate’s customs authority. VAT is charged separately by the FTA at 5% on the value of most supplies, including on the customs value of imported goods, so the two can both apply to the same shipment.
Which UAE tax has the highest rate?
Excise Tax has the highest headline rates in the UAE, at 100% on tobacco products, electronic smoking devices and their liquids, and energy drinks. Corporate Tax tops out at 9% and VAT is a flat 5%.
Do all four taxes apply to every UAE business?
No. Corporate Tax applies to nearly every business, subject to Small Business Relief. VAT only applies once you cross the registration threshold or choose to register voluntarily. Excise Tax only applies if you produce, import, or stockpile a specific listed product. Customs duty only applies if you import physical goods from outside the GCC. A pure services business with revenue under the VAT threshold and no imports could, in practice, face only Corporate Tax.
Tax Consultant Dubai
Expert tax advisory services in Dubai.
Get professional consultation from experienced tax specialists.
How Tax Consultant Dubai Can Help
Managing four different tax regimes with four different rules is where most businesses lose time and money. We help you identify exactly which taxes apply to your specific activity, register correctly with the FTA, and stay compliant across Corporate Tax, VAT, and Excise Tax without overpaying or missing a deadline.
Contact Tax Consultant Dubai today to get a clear picture of which UAE taxes apply to your business and what each one will cost you.
