UAE Tax 2025–2026: The New FTA Rulebook Every Company Must Survive
Summary
This article explains the new UAE tax landscape for companies registering in 2025, focusing on Federal Tax Authority (FTA) compliance: VAT registration thresholds, corporate tax at 0% up to AED 375,000 and 9% above that, Small Business Relief, the nine-month filing rule, and the upcoming e-invoicing and revised VAT rules. Using a practical case study of a company incorporated in March 2025 that reaches AED 400,000 in October and closes the year at AED 1.5 million in revenue and AED 1.1 million in profit, we build a fictional but realistic compliance calendar for 2025 and an action plan for 2026. The message is blunt but useful: the UAE remains a business-friendly hub, but the era of casual paperwork is over. If founders want the upside of a low-tax jurisdiction, they must treat FTA deadlines with the same respect they give their biggest client.Once upon a time the UAE was marketed as a corporate Neverland: sunshine, skyscrapers and almost no tax. That fantasy officially expired when corporate tax, tighter VAT rules and now e-invoicing walked in the door. Today the Federal Tax Authority (FTA) is less friendly mascot and more airport security — polite, efficient and absolutely not amused if your paperwork is wrong.
If you are setting up a company in 2025, especially as an SME founder, you cannot afford to treat tax as an afterthought. The good news is that the rules are clear. The bad news is that the penalties are just as clear.
1. The New UAE Tax Landscape in One Page
Here is the condensed reality for companies operating in the UAE:
Value Added Tax (VAT): Standard 5% VAT remains in place. A business resident in the UAE must register once its taxable supplies and imports exceed AED 375,000 in the previous 12 months or are expected to do so in the next 30 days. A voluntary registration window opens above AED 187,500.
Corporate Tax (CT): From financial years starting on or after 1 June 2023, companies pay 0% corporate tax on taxable income up to AED 375,000 and 9% on profits above that threshold.
Small Business Relief: Businesses with revenue up to AED 3 million can elect Small Business Relief for corporate tax, effectively treating taxable income as zero for that period (but still needing to file).
Corporate tax return deadline: The CT return and payment are due within nine months after the end of the financial year (for calendar-year companies: 30 September of the next year).
Revised VAT rules from 1 January 2026: The Ministry of Finance has announced updated VAT regulations to modernise and align with global practice.
Mandatory e-invoicing: A national e-invoicing system goes live in phases: framework published in 2025, pilot from July 2026, and mandatory phases rolling out from January to October 2027. Violations can draw penalties of up to AED 5,000 per instance.
In short: the UAE is still low-tax, but it is no longer low-admin.
2. Case Study: A 2025 Start-Up Under the FTA Microscope
Let us take a fictional but realistic company, "Desert Pixel FZ-LLC":
Incorporated: 15 March 2025
Financial year: 1 January – 31 December
Revenue milestones: reaches AED 400,000 in October 2025; closes the year at AED 1,500,000 in revenue
Profit before tax 2025: AED 1,100,000
From the FTA’s point of view, this company is not a cute little start-up. It is a taxable person that triggers both VAT and corporate tax rules within its first year.
2.1 VAT: The Moment You Cross AED 375,000
Our company hits AED 400,000 of taxable supplies in October 2025. That means the mandatory VAT registration threshold of AED 375,000 is crossed during that month. The company then has 30 days to apply for VAT registration via the FTA portal. Failure to do so can trigger an AED 10,000 late-registration penalty plus back-dated VAT.
2.2 Corporate Tax: 0% then 9%
Because the company’s first full tax period starting after 1 June 2023 is the calendar year 2025, it falls into the corporate tax net immediately. Taxable income is its profit after adjustments. Without Small Business Relief, the tax bill for 2025 would roughly look like this:
Taxable income: AED 1,100,000 (simplified)
0% CT on first AED 375,000 = AED 0
9% CT on remaining AED 725,000 = AED 65,250
However, because revenue is below AED 3 million, the company can elect Small Business Relief for 2025, which would treat its taxable income as zero for that year – a huge cash-flow advantage – but it still has to register, keep proper records and file the corporate tax return.
3. 2025 Compliance Checklist – Fictional but Realistic Calendar
Below is a fictional but plausible schedule for all key FTA-related actions in 2025 for our example company. Exact dates are illustrative but match real deadlines and rules.
Date | Event / Threshold | FTA-Related Action | Why It Matters |
|---|---|---|---|
15 Mar 2025 | Company incorporated | Set financial year (1 Jan–31 Dec). Create FTA account and map future CT & VAT obligations. | Decides first corporate tax period and future filing deadlines. |
01 Apr 2025 | Start of active trading | Begin tracking taxable supplies and imports monthly against VAT threshold. | Evidence for when the AED 375k VAT threshold is crossed. |
30 Jun 2025 | Revenue ~AED 200k | Optional: consider voluntary VAT registration if clients prefer VAT-registered suppliers. | Can improve credibility and allow input VAT recovery earlier. |
10 Oct 2025 | Cumulative revenue passes AED 375k (hits AED 400k) | Mandatory VAT registration now triggered. Start preparing VAT documentation and contracts. | From this point, failure to register within 30 days risks penalties and back-dated VAT. |
09 Nov 2025 | 30 days after crossing threshold | Latest date to submit VAT registration to FTA and obtain TRN (Tax Registration Number). | Avoids late-registration fine and ensures VAT is charged correctly going forward. |
01 Nov 2025 | Post-TRN invoicing begins | Issue VAT-compliant tax invoices (with TRN, VAT amount, etc.) and set up accounting system to track output and input VAT. | Builds the audit trail the FTA expects; makes future e-invoicing transition easier. |
31 Dec 2025 | Financial year end | Close books, reconcile VAT for Q4 and confirm eligibility for Small Business Relief (revenue <= AED 3m). | Locks in numbers for first CT return; confirms whether relief can be elected. |
28 Jan 2026 (for Q4 2025) | First VAT return due (assumed quarterly period Oct–Dec 2025) | File VAT return and pay any VAT due via FTA portal. | Establishes compliance record; late filing risks administrative penalties. |
30 Sep 2026 | Deadline for 2025 corporate tax return | File CT return for period 1 Jan–31 Dec 2025, elect Small Business Relief if desired, and pay any tax due (if relief not elected). | Mandatory even if the effective tax is zero; missing this creates fines and invites audits. |
Notice how the real work spills into 2026: the FTA doesn’t care that you were “busy scaling” – it only cares whether the return is filed within nine months.
4. 2026 Action Plan – How This Company Stays Compliant (and Sane)
Here is a practical, investor-friendly action plan for 2026 that keeps our company on the right side of the FTA while still giving founders time to actually run the business.
Q1 2026 (Jan–Mar)
VAT routines: File VAT returns on time for Q4 2025 (Jan) and set a calendar for ongoing quarterly returns.
CT readiness: Finalise 2025 financial statements with your auditor or accountant. Decide whether to elect Small Business Relief for 2025.
Policy update: Update engagement letters and client contracts with VAT terms, late-payment clauses and invoice formats that will later map easily to e-invoicing.
Q2 2026 (Apr–Jun)
VAT and new rules: Monitor implementation details of the revised VAT regulations effective 1 January 2026; adjust treatment of any affected supplies (for example, exemptions and zero-rated categories).
Corporate tax modelling: Prepare a projection for 2026 revenue and profit. If revenue is likely to exceed AED 3m, plan for the end of Small Business Relief and future 9% tax cash outflows.
Internal controls: Introduce monthly closing routines: bank reconciliations, VAT ledger checks and digital document storage that would survive an FTA audit.
Q3 2026 (Jul–Sep)
Corporate tax filing: By 30 September 2026, file the 2025 corporate tax return and pay any tax due (if Small Business Relief is not elected). Keep confirmation receipts from the FTA portal.
E-invoicing preparation: Even though the mandatory phases start later, the July 2026 pilot is the first real dress rehearsal. Assess ERP/accounting systems, choose an FTA-accredited service provider and start internal testing of structured electronic invoices.
Data hygiene: Clean up customer master data (legal names, TRNs, addresses). E-invoicing punishes sloppy databases.
Q4 2026 (Oct–Dec)
Dry-run e-invoicing: For at least one quarter, issue all invoices from the new system, even if the legal mandate for your segment only starts in 2027.
Compliance health check: Conduct an internal tax review: VAT treatment by line item, corporate-tax adjustments, related-party transactions and record-keeping against the Federal Tax Procedures Law (especially audit and documentation provisions).
2027 budget and tax forecast: Build next year’s budget including VAT outflows, potential 9% corporate tax and any system or advisory costs tied to e-invoicing and new VAT rules.
5. What This Means for Founders, CFOs and Everyday Life
The emotional reaction is predictable: “We came to the UAE to escape heavy taxation, and now you are telling us to memorise deadlines like it’s exam week.” But the deeper truth is more balanced.
For founders, the new tax regime is a discipline tool. If you cannot keep your VAT and CT filings straight, you probably cannot scale responsibly either.
For finance teams, the shift to e-invoicing and regular FTA interaction professionalises the function. Excel chaos is no longer an option; systems and controls become non-negotiable.
For employees and everyday residents, better tax compliance means more predictable public finances. The trade-off for a relatively low tax rate is that the government will insist that everyone actually pays what they owe.
The polarising part is simple: you can either complain that the UAE is becoming “too regulated”, or you can accept that a serious global hub needs serious tax rules. For businesses that know how to read a calendar and answer an email from the FTA, the country is still one of the most attractive low-tax jurisdictions on the planet.
The smart move is obvious: treat compliance as a cost of admission, not a burden. Build your checklist, automate what you can and keep your receipts. The sunshine is still free – but the FTA now expects a proper paper trail for the profits you earn under it.