UAE Corporate Tax: what changes at the AED 375,000 threshold
How the 0% and 9% bands work and what to prepare before your first return.
The deadline and what is at stake
UAE VAT returns are filed on EmaraTax, usually every quarter. The return and any VAT payable are due by the 28th day after the end of the tax period, so the January to March quarter is due by 28 April. Errors found later have to be corrected, and depending on their size that means either an adjustment in a later return or a voluntary disclosure. Both take time, and penalties can apply. The cheapest fix is the one made before you press submit.
1. Reconcile the return to the ledger
The single most useful control is a reconciliation between the VAT return and your general ledger. Every figure on the return should be traceable to the accounts.
| Check | What should agree |
|---|---|
| Output VAT | Output VAT on the return equals the output VAT control account movement for the quarter |
| Sales | Standard-rated, zero-rated and exempt sales on the return agree to revenue in the ledger |
| Input VAT | Recoverable input VAT equals the input VAT account, less anything blocked or not supported |
| Balance | Net VAT payable equals the VAT liability on the balance sheet at quarter-end |
Differences are normal; unexplained differences are not. Each one should have a short note: a credit note issued after the period, a timing difference, a correction from a previous quarter.
2. Only claim what you can support
Input tax can only be recovered with valid evidence, normally a tax invoice that meets the legal requirements: it is titled "Tax Invoice", shows the supplier's Tax Registration Number, your details, the date, a description of the supply and the VAT amount. Before the return goes in, sample your largest input claims and check:
- The invoice is a valid tax invoice, in your company's name, not a quotation or a proforma.
- The supplier's TRN is correct and the supplier is registered.
- The cost relates to your taxable business, not to exempt supplies or personal use.
- The item is not blocked. Business entertainment for people other than employees, motor vehicles available for private use, and goods or services provided to employees for their personal benefit are generally not recoverable.
3. Do not forget the reverse charge
When you buy services from overseas suppliers, such as software subscriptions, consultants or marketing platforms, you usually account for VAT yourself under the reverse charge. That means declaring output VAT and, if the cost relates to taxable supplies, claiming the same amount as input VAT. The net effect is often nil, but leaving it out still makes the return wrong. Imports of goods through customs follow a similar mechanism.
4. Prove every zero-rated sale
Zero-rating is valuable, because you charge 0% but can still recover input VAT. It is also one of the first things the FTA tests. For exports of goods you need official and commercial evidence that the goods left the UAE, generally within 90 days. For services to overseas customers, keep evidence that the customer is outside the UAE and that the conditions for zero-rating are met. Without the evidence, the sale is treated as standard-rated and the 5% becomes your cost.
The difference between zero-rated and exempt is explained in a separate article.
5. Split sales by emirate
The UAE VAT return asks for standard-rated supplies by emirate. Use the location of your business establishment or the place of supply as the guidance requires, and keep the split consistent from quarter to quarter. A quick check that the emirate totals add up to total standard-rated sales takes minutes.
A reconciled return with a one-page note of explained differences is the best evidence you can show if the FTA ever asks questions.
6. If you find an error
If the error in a past return changes the tax due by AED 10,000 or less, it can generally be corrected in the return for the period in which you found it. Above that, a voluntary disclosure is required. Acting before the FTA finds the error usually reduces penalties, so it pays to look.
A quarter-end checklist
- Close the books for the quarter, including credit notes and accruals.
- Run the VAT report from your system and compare it to the ledger.
- Review a sample of large input claims against tax invoices.
- Account for reverse charge on imported services and goods.
- Check evidence for all zero-rated sales.
- Agree the emirate split to total sales.
- Prepare a one-page reconciliation with explained differences.
- Submit and pay by the 28th, and file the reconciliation with the return working papers.
Keep VAT records for at least five years after the end of the tax period they relate to.
This article is general information based on UAE VAT rules as published by the Federal Tax Authority. It is not advice for your business. Hassan reviews VAT returns and helps with corrections and voluntary disclosures.
Official source: Federal Tax Authority
