Corporate Tax and VAT for E-commerce Sellers in the UAE.

Online sellers deal with the same UAE tax rules as a shop on the high street. The difference is in the plumbing. Money arrives through marketplaces and payment platforms, often net of fees. Stock may be bought abroad. Software and advertising are billed from overseas. Returns flow back weeks later. Each of these has a tax consequence.

Marketplace payouts and fees

A marketplace payout is not your sales figure. It is your sales, less commission, fulfilment fees, advertising and refunds. For both taxes, the starting point is the gross value of what your customers bought.

The FTA's E-Commerce VAT Guide explains that it depends on how the marketplace acts:

• Disclosed agent. If the marketplace sells in your name, the sale is treated as made by you directly to the customer. You account for VAT on the full sale, and the marketplace's commission is a separate supply of services to you.
• Undisclosed agent. If the marketplace sells in its own name, there are two supplies: from you to the marketplace, and from the marketplace to the customer.
• Principal. If the marketplace buys your goods and resells them, it is the supplier to the customer, and you have sold to the marketplace.

The guide gives 5% as the default VAT rate on agency services supplied in the UAE, so a UAE marketplace's commission normally carries VAT, which a registered seller may recover as input tax. For Corporate Tax, fees incurred wholly and exclusively for the business are deductible.

In practice, record the gross sale and each fee separately rather than booking the net payout. It is the only way to reconcile to the marketplace statement and to show the right revenue.

When VAT applies to online sales and imports

A UAE resident business must register for VAT when its taxable supplies and imports exceeded AED 375,000 over the previous 12 months, or are expected to exceed it in the next 30 days. Imports count towards the threshold, which surprises many sellers who buy stock abroad.

• Goods sold from UAE stock. Goods located in the UAE when supplied are supplied in the UAE, and VAT at 5% applies to taxable sales.
• Goods imported. Import VAT at 5% is charged on the customs value. A VAT-registered importer that has linked its customs registration number to the FTA can account for import VAT in its next VAT return instead of paying at the border, and recover it as input tax under the normal rules. An importer that is not registered must pay the VAT before the goods are released, using the VAT301 import declaration form.

Digital services from abroad

Most sellers pay foreign platforms for software, hosting or advertising. Where the supplier is outside the UAE, does not charge UAE VAT, and you are registered or required to register, the reverse charge mechanism generally applies. You record VAT on the purchase as output tax in your return and recover it as input tax under the normal rules, so for a business with full recovery the net cost is usually nil.

For electronic services, the place of supply follows where the service is actually used and enjoyed. Since 1 January 2026 you no longer need to issue a tax invoice to yourself for reverse charge imports, but you must still account for the VAT and keep the supporting documents.

Stock and returns in the books

Stock is where e-commerce accounts most often go wrong.

• Stock bought is not an expense yet. Goods held for sale sit in inventory and become a cost as they are sold. Record landed cost, including freight and duty, not just the supplier invoice.
• Count and reconcile. Marketplace warehouses, your own store and goods in transit should all be counted and reconciled to the books, at least at the year end.
• Returns reverse the sale. Where a customer returns goods and is refunded in full or in part, the VAT Decree-Law requires a registrant to adjust the output tax. Book the refund against sales and the goods back into stock if they can be resold.

When an individual seller falls under Corporate Tax

A company is within Corporate Tax from the start. An individual trading in their own name is not, until their business turnover passes a test.

Under Cabinet Decision No. 49 of 2023, a natural person's business activities are subject to Corporate Tax only where their total turnover from business activities in the UAE exceeds AED 1,000,000 in a Gregorian calendar year. Turnover means the gross amount of income, and the FTA's guide on natural persons confirms that the threshold looks at all business activities together.

Two points catch people out:

• Gross, not net. The test uses gross income, so it is measured on what customers paid, not what the marketplace transferred.
• No tax-free first million. Once the threshold is passed, profit from the first AED 1,000,000 of turnover is not exempt. The normal 0% band on the first AED 375,000 of taxable income applies, and Small Business Relief may be elected where revenue is AED 3,000,000 or less, for tax periods ending on or before 31 December 2029.

A worked example

"I sell homeware on two marketplaces as an individual. In 2026 customers paid AED 1,100,000. The marketplaces kept AED 150,000 in commission and fees, so I received AED 950,000. Stock and other costs were AED 800,000."

• The AED 1,000,000 test. Turnover is AED 1,100,000, based on gross sales, even though the bank only saw AED 950,000. The business is within Corporate Tax for 2026.
• Taxable income. AED 1,100,000 less AED 150,000 of fees and AED 800,000 of costs is AED 150,000. That is within the 0% band, so no tax is due, but a return is still required. Revenue is below AED 3,000,000, so Small Business Relief could also be elected.
• VAT. Taxable sales of AED 1,100,000 are well above the AED 375,000 mandatory threshold. VAT at 5% applies to taxable sales, and VAT on the marketplace fees and imported stock can be recovered under the normal rules.

How we help

We reconcile marketplace statements to gross sales, fees and refunds each month through our bookkeeping service, keep stock records in line with the counts, prepare VAT returns including imports and reverse charge purchases, file Corporate Tax returns, and report turnover against the AED 1,000,000 and AED 3,000,000 thresholds during the year.

Frequently asked questions

Does an individual selling online pay UAE Corporate Tax?

Only if their total turnover from business activities in the UAE exceeds AED 1,000,000 in a calendar year, under Cabinet Decision No. 49 of 2023. Turnover is the gross amount of income, not the net payout.

If my turnover passes AED 1,000,000, is the first AED 1,000,000 of profit tax-free?

No. The FTA guide on natural persons says there is no exemption for the profit relating to the first AED 1,000,000 of turnover. The normal 0% band on the first AED 375,000 of taxable income applies, and Small Business Relief may be available.

Do I pay VAT on software and advertising bought from abroad?

If you are VAT registered and a supplier outside the UAE does not charge UAE VAT, the reverse charge mechanism usually applies. You account for the VAT in your return and recover it as input tax under the normal rules.

How is VAT handled when a customer returns an item?

The VAT Decree-Law requires a registrant to adjust output tax where goods are returned and the payment is refunded in full or in part.